KBank remains cautious despite relatively low bad-loan rate

Despite its low non-performing-loan ratio, Kasikornbank will retain its conservative management of its retail loan portfolio in response to the Bank of Thailand's warning.

Wirawat Panthawangkun, executive vice president, said yesterday that according to the figures in the third quarter of 2012 for loan growth and personal loans that are more than three months in default, the growth rates are higher. However, compared with the same quarter in 2011, it is hard to assume that household debt is at a dangerous level.

According to the central bank, the growth of personal loans in the banking industry in the third quarter of 2012 was 21 per cent against 16 per cent in the previous year, while NPLs from personal loans increased to 37.8 per cent and credit cards at 11.1 per cent year on year. The NPL ratio of retail loans in the third quarter of 2012 was 25 per cent, up from 18 per cent a year earlier.

The year-on-year growth in both loans and NPLs was partly driven by flood-affected consumers and the flood-relief scheme.

About 70-80 per cent of retail loans are housing and auto loans, but the BOT's warning is for personal loans. The NPL ratio for retail loans as of the end of the third quarter was stable at 2.1 per cent and, compared with the third quarter of 2011, had increased from 2 per cent.

The situation of household debt is likely not to be tense, but the warning of the central bank is sufficient for KBank to rethink the risk management of its retail loan portfolio even though its NPL ratio is at a low level, Wirawat said.

KBank's retail NPL ratio at 1.6 per cent is lower than 2.10 per cent of the industry. One-month unserviced loans were at 14.27 per cent, improving from 15.14 per cent in 2011.

The quality of NPLs confirms that the bank is on the right path in its customer segmentation strategy with risk-based pricing and credit limits, Wirawat said.

The bank conducted research on the potential of people with monthly income under Bt10,000 for personal loans but found that it was not ready to deal with the risk from this customer group, which proved that KBank should not focus on people with low debt-servicing ability.

At least Bt10,000 of monthly income qualifies for a personal loan and Bt15,000 for a credit card at the bank.

In response to the central bank's warning, KBank will review credit lines to existing customers every three months and boost its collection staff to prevent unpaid loans of more than one month.