Clients urged to restructure debt early if they see problems

Borrowers who wish to maintain loans only "in case of emergency" or for liquidity purposes will be charged by the banks if their credit lines are unused.

The slump in economic growth has caused banks to adjust their targets for new loans next year. Clients will also have to think more carefully about their borrowing needs, and banks will be more cautious and operate stricter loan procedures as part of their risk management.

These factors make it inevitable that loan expansion next year will fall from this year's level.

Most banks project lending growth based on expansion in gross domestic product, which is expected to be 2 to 3 per cent next year - or possibly even lower.

Bangkok Bank, Krung Thai Bank, Siam Commercial Bank and Kasikornbank have recently announced decreases in their 2009 loangrowth targets to around 5 to 6 per cent, while TMB Bank now aims to expand its loan portfolio by just 2 to 3 per cent. Bank of Ayudhya expects its loans to expand at twice the rate of GDP growth.

Krung Thai Bank president Apisak Tantivorawong said the bank aimed to grow at the same rate as industrial expansion, in order to prevent overexposure to risk.

Customers, however, will face strict lending criteria, and credit lines that are unused by borrowers will be subject to a fee at yearend to prevent clients blocking credit to other potential borrowers.

Kannikar Chalitaporn, Siam Commercial Bank president, said the bank would charge 0.5 to 1.5 per cent of an unused credit line in order to discourage customers from asking for credit just in case of an emergency. She said banks had a limited amount they could lend, and credit should therefore go to those who really needed it.

Normally, the bank would charge its large customers for an unused credit line, but not small and mediumsized customers. But from now on - and as part of Siam Commercial's compliance with Basel II requirements - SME clients will also be charged.

"We must collect the fee to prevent those borrowers who apply for credit lines with every bank but have no intention of using the money," said Kannikar.

Most retail loans are also expected to grow more slowly next year, the exception being home loans, which banks still expect to expand from this year's growth level.

Besides, banks are closely monitoring borrowers and offering help if it seems they are unable to pay their debt. This will be done by extending payment periods and cutting monthly instalments, in order to prevent nonperforming loans (NPLs) from rising.

Rungruang Sukkirdkijpiboon, executive vice president for the Retail Lending Products and CRM Division of Siam Commercial Bank, said outstanding creditcard loans, personal loans and small business loans this year had expanded by Bt2 billion, Bt4 billion and Bt1.2 billion respectively. Next year's targets have been cut to Bt1.6 billion, Bt3 billion and Bt500 million.

Mortgages are the only products for which the bank has not cut next year's figure, aiming for Bt55 billion of new loans - the same as this year - because these are longterm loans that are less effected by the economic crisis.

The bank's NPLs have fallen this year from 3.3 per cent to 2.8 per cent, following the establishment of a committee comprising staff from many departments, including risk management and analysis, in order to improve the debtcollection system.

"We classify customers by risk more thoroughly and we don't wait until they stop making their repayments. We recommend that they join an earlyrestructuring programme, which has been prepared for next year's problems," said Rungruang.

Udom Chaiyathep, hub director of Thanachart Bank, said that as auto sales are expected to drop by 30 per cent next year, the bank's loans - which are mostly for car leasing - are expected to fall accordingly. However, the bank will try to maintain its market share of more than 20 per cent.

Next year, customers will be required to pay at least 30 per cent up front, against the current 20 per cent, because of higher risks.

Thanachart has been closely monitoring customers' behaviour, and they will be approached in cases of debtrepayment problems, with the bank offering to extend the payment period and decreasing instalments to a more affordable amount.

Sakchai Peechapat, executive vice president and head of retail banking at Tisco Bank, and Chatchai Payuhanaveechai, senior vice president of Kasikornbank, said their growth projections for retail loans would be adjusted as both banks had decreased their overall loangrowth target. However, the exact numbers have not yet been decided.

Tinnakorn Boonyakalin, senior vice president and manager of the Personal Loan Products Department of Krung Thai Bank, said retail lending would drop next year. Most of its retail loans are to government officials, who are paid via the bank.