BBL eyes loan sector cautiously
Bangkok Bank's net profits lagging behind others due to slow consumer lending
Bangkok Bank is facing a dilemma in its plan to raise its interest income from personal loans, given high risks associated with lending in the retail segment.
In the past few years, BBL's net profits have lagged behind those of Siam Commercial Bank and Kasikornbank, primarily because of a smaller proportion of consumer loans. BBL's consumer lending accounts for only 11 per cent of its total loan portfolio, against 45 per cent for corporate loans. The bank has only two products in the retail segment - housing loans and credit cards.
By contrast, KBank's consumer-loan proportion is 26 per cent and SCB's 42 per cent.
BBL, the country's largest bank, has acknowledged that even though personal loans are a high-yield product, it is necessary to balance yield and risk, said executive vice president Thaweelarp Rittapirom.
He said the bank was studying this product, adding that human resources would be a key component of any move into this segment.
BBL tested the personal-loan market last year by offering loans to payroll customers and employees of corporate customers. The results of that experiment have not yet been fully analysed, so the bank has not yet decided whether it should officially launch personal lending this year, Thaweelarp said.
The bank has also tested the consumer-loan segment by offering overdraft (O/D) loans to its mortgage customers. O/D loans are similar to consumer loans, whereby customers can use the funds for purposes other than those the original loan was granted for.
BBL soft-launched O/D loans in mid-2012. New loans booked via this option amount to around Bt1 billion. At first, O/D was offered to middle-management or white-collar people aged at least 30 years. The bank this year will expand O/D to customers who don't hold mortgages with it and to general white-collar personnel who have worked for more than three years.
Meanwhile, mortgages remain a focus of the bank as it targets growth of 10-12 per cent from the current outstanding loans of Bt157 billion.
The property boom upcountry is an opportunity for banks including BBL, as this will naturally fuel growth in housing loans in the provinces. However, Thaweelarp said the warnings of a bubble in the real-estate sector should be listened to. Mortgage lending this year must be done carefully, with banks checking the quality of both property projects and buyers, he said.
While the Bank of Thailand keeps its policy rate low to stimulate business, low interest rates are not necessarily the only reason people are snapping up real estate. Consumers consider buying homes when they have confidence in the economy, which means their careers and incomes will be secure, he said.