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KBank willing to lose SME clients as it limits credit

KASIKORNBANK, the biggest lender to small and medium-sized enterprises, is limiting credit lines and is willing to lose customers to other banks to defend against non-performing loans (NPLs) after finding that medium-sized companies that had expanded aggressively this year were now running into cash-flow problems.

"Since the third quarter, loan demand from SMEs has dropped 25 per cent because they have suspended drawdowns and some customers have repaid debt," Patchara Samalapa, executive vice president of KBank, said yesterday.

The economic slowdown is taking its toll on SMEs, he said.

The bank classifies SMEs into three categories. The first is those that expanded production capacity by taking out bank loans. They are now facing a liquidity squeeze from falling sales while they are saddled with a heavy debt load. This group is generating a lot of NPLs in the banking industry.

The second is those involved in the trading business. The bank is worried about inventory management because when purchasing power dries up, companies that have ordered a lot of stock might incur an inventory loss.

The third is those that have enough cash and suspend borrowing from banks when they see the economy getting softer. Moves by this group have contributed to reduced lending by banks.

When KBank grasped the situation, it allowed its customers to refinance with other banks.

The economic uncertainty is expected to drag into next year, so the bank will focus on acquiring new customers by offering credit facilities particularly to those that cannot access alternative funding sources. Some businesses operate on a cash basis. They have limited banking transactions and perhaps lack collateral to apply for a loan.

"We will try to capture SMEs in the provinces and refocus on the export sector, as we believe exports in 2014 will recover in line with the global economy. Industries in the export sector, however, should be selectively captured. KBank will go after companies dealing in auto parts, electronic parts, agriculture, border trade and trade with China," Patchara said.

Next year, KBank targets SME loans to grow by 9-11 per cent to Bt571.98 billion, revenue to expand 13 per cent to Bt39.67 billion and its NPL ratio to improve to 2.55 per cent from 3.05 per cent this year.

The bank will emphasise efficient operations to offset staff turnover. Lower staff expenses and loan growth should help pull up earnings before provisions and taxes (EBPT) by 21 per cent in 2014 versus 13 per cent in 2013.

KBank's outstanding SME loans will end this year up 10 per cent at Bt516.17 billion, while revenue rose by 13 per cent to Bt35.19 billion.


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