CFG Services has trimmed its 2014 loan-growth target in light of the economic uncertainty from the political unrest and the expected fiercer competition in the refinancing market.
Piyasak Ukritnukun, managing director of the well-known Ngern Tid Lor (Money on Wheels), said yesterday that the company’s new loans would increase by only 20 per cent this year, half of last year’s 40 per cent.
The economic stagnation will pull down sales of new vehicles, so banks that are major players in the hire-purchase (lease to own) segment will shift their focus to auto refinancing, he said.
New loans are expected to reach Bt11 billion this year, up from Bt9 billion last year, while outstanding loans will rise to Bt13.5 billion from Bt10 billion.
The key driver of CFG’s new loans this year will continue to be trucks-for-cash, after entering this segment last year. The target is Bt3 billion, up from Bt2 billion last year.
In term of units, motorcycles account for 60 per cent of the loan portfolio, followed by passenger vehicles and pickup trucks at 25 per cent, trucks and tractors at 10 per cent, and buses and wet-market microfinance for the rest.
Although the company has not changed its lending criteria, it will carefully consider credit lines to refinancing customers to deal with the actual prices of used vehicles and to maintain non-performing loans at below 1 per cent of its portfolio.
The company will assess used-car prices more frequently – every month instead of every quarter – to prevent losses on sales of repossessed vehicles.
Last year, CFG lost money on the sales of 30 per cent of its repossessed vehicles, up sharply from 10 per cent in the previous years, because of the steep plunge in the prices of used cars following the government’s launch of the first-car scheme.
The fall in prices of used vehicles was seen early last year for passenger cars and pickups and later in November for trucks.
The used-car market has not settled down yet, but prices are expected to stabilise by midyear, when the company might revise its loan-growth target again.
Another reason for lowering its loan-growth sights is that the company will aggressively pursue the general insurance business after obtaining a non-life broker’s licence last year.
CFG has transformed itself from a product company to a segment company to meet the basic financial requirements of consumers.
“Consumers need loans, insurance, savings and transactions. CFG can well serve loans to customers, and now we are moving to providing auto and personal accident insurance by targeting premiums of Bt250 million for the first year,” Piyasak said.
The company plans to add life insurance and bill payment in the future, he added.