GHB sees sharp rise in bad loans

Nonperforming loans (NPLs) rose substantially from 5.8 per cent of outstanding loans at the end of last year to 11.8 per cent at the end of June, Khan Prachuabmoh, GH Bank's president, said yesterday.

NPLs were Bt31.78 billion, against outstanding loans of Bt577.24 billion at the end of December, with NPLs rising to Bt68.99 billion and outstanding loans rising to Bt582.74 billion at the end of June.

Khan said many factors - including the economic slowdown, rising interest rates, high oil prices and a new method of calculating NPLs - had caused the sharp rise in NPLs. The daypastdue method forces loans to be counted as NPLs more easily than the previous instalmentdefault method, he said.

To bring bad debts down, the bank will centralise baddebt management, outsource debt collections and install new computer software for debt management, he said.

Khan said he had also asked the Finance Ministry to seek permission from the Bank of Thailand to allow GH Bank to postpone implementing a new international accounting standard known as IAS39.

Fully implementing the tough new standard would turn the bank's profits into losses due to an increase in the reserve requirement against doubtful debts, he said. Central bank enforcement should be delayed until 2012, he said, while under the current plan, it has to fully implement IAS39 next year.

Such losses would weaken the bank's ability to offer more mortgage loans, he said.

As of June 30, the bank's operating profits were Bt727 million, down 4.47 per cent from the same period last year, he said. In the first half of this year, GH bank made new loans worth Bt34.52 billion to 49,002 new mortgage holders.

The bank's nonperforming assets - real estate seized from those who failed to repay loans - were worth Bt7.4 billion. The bank plans to sell these distressed assets.

The bank yesterday colaunched a new mortgage product worth Bt500 million with the Secondary Mortgage Corporation (SMC).

Under this scheme, the bank will offer fixed interest for one, two and five years with rates of 3.99 per cent, 4.99 per cent and 6.99 per cent respectively. After the fixedrate period ends, rates will float or be equivalent to the minimum retail rate minus 0.25 per cent. Terms of repayment are 30 years. Each borrower can apply for a loan of between Bt300,000 and Bt10,000,000, but the bank will loan as much as 85 per cent of the house price.

Khan said the loans would fill mortgage gaps, enabling the bank to provide bargain interest rates to those who are not members of the Social Security Fund or the Government Pension Fund.

Duangporn Arbhasil, president of the SMC, said it was a pilot project and more would come later.