Banks adjust to first-car buyers' burden

Banks say they are having to change their strategy for personal loans and credit cards as first-car buyers are facing a higher cost burden from vehicle payments, meaning they will cut spending on other items.

With 1.2 million vehicles sold through last year's first-car tax-incentive scheme and instalments of Bt7,000-Bt8,000 a month, between Bt7 billion and Bt8 billion will be drained from consumer purchasing power each month.

Chatchai Payuhanaveechai, executive vice president of Kasikornbank, said yesterday that in theory, the impact on the personal-loan and credit-card market was expected to be Bt4 billion to Bt5 billion per month, so KBank has to shift to high spenders like holder so platinum and gold credit cards.

"We will focus more on customers earning a monthly income of more than Bt30,000, while those earning less than Bt30,000, who are 45 per cent of the credit-card portfolio, will be reduced to 40 per cent," he said.

For personal loans, KBank will target those with a monthly income of more than Bt15,000.

The adjustment will help KBank maintain the growth rate of spending at 20 per cent, while the growth rate of lending is expected be in line with the market's 10-11 per cent, Chatchai said.

Thakorn Piyapan, managing director of Krungsri Consumer, said first-car buyers would have high debt-to-income ratios, which might pull down spending financed by credit cards or personal loans.

Loan approvals are based on the debt-to-income ratio. Although the company has not seen any signs of repayment problems yet because the first two months of the year are the season of spending, it is ready to monitor closely the debt-payment ability of existing and new customers.

About 60-70 per cent of the portfolio at Krungsri Consumer is the high-purchasing-power group with monthly incomes of at least Bt30,000, he said.

Vibrant spending upcountry especially in major cities is helping to boost the personal-finance market. Krungsri Consumer predicts spending this year will expand 15-20 per cent.

Krungsri expects spending growth to be in tandem with the market, while outstanding loans are expected to grow by 12 per cent from last year's Bt103 billion.