KLeasing to get tougher on NPLs

Isara Wongrung, managing director of KLeasing, which has a 7percent market share, said the number of NPLs might increase amid the dire economic situation. Thus, the company will focus more on debt quality control and solving debt problems.

Even though auto sales fell a considerable 2530 per cent year on year last month, the company is not very concerned about lending targets, because the target, Bt30 billion, was not high.

The new loan target consists of newcar loans of Bt12 billion usedcar refinancing of Bt5 billion, corporate loans of Bt3 billion and cardealer loans of Bt10 billion.

"We'll not expand our network or recruit more employees, because then our costs will increase, and we don't know when the economy will recover. But we will use Kasikornbank's network to extend 60 per cent of total loans this year. We expect to lower NPLs to 1.8 per cent by yearend, with a writeoff rate of 0.2 per cent. If we can do that, net revenue will be Bt227 million," said Isara.

KLeasing last year had an NPL rate of 2.3 per cent of its total credit.

Isara said the company's NPL stood at 2.44 per cent at the end of last month, still higher than the target. He estimates distressed loans will decline to 2.3 per cent this month, because repossessed cars will be sold and the debtcollection process tightened.

"We've prepared several measures to control NPLs. Customers who are one to 90 days late making their payments will be called by our debtcollection staff. If they still fail to pay, our staff will meet with them in person. If the customers have a real debtrepayment problem, we can offer several choices to reduce their burden, such as instalmentperiod extensions from 48 months to 60-72 months with the monthly amount reduced to meet ability to pay. But eventually, if the customers simply cannot afford even this, the company will have to seize their cars," said Isara.

The repossessed cars would cause a loss of about 20 per cent in lending, thus increasing the writeoff rate.

Stephen Phadoongsidhi, head of assetquality management, said the number of KLeasing's debtcollection staff would double this year, because loan amounts had increased and NPL control measures become more stringent.

As well, additional outsource companies would be brought in for debt collection. Even though all of this will increase the company's costs, it is better than accepting an increase in NPLs.

"At present, customers with no history of default will receive a telephone reminder once payment is three days late," said Stephen.

Last year, 620,000 cars were sold in the Kingdom, but auto sales are expected to drop 1520 per cent this year. Last month's data show January car sales dropped 2530 per cent.

Meanwhile, interest may be slashed if the company's funding costs decrease. However, the trend in NPLs must also be considered.

KLeasing's interest on newcar loans now stands at 3.25 per cent.