Kiatnakin Bank has tightened approval criteria for both hire purchase and real estate loans amid the economic and credit slowdowns.
“We saw a rise in non-performing loans of 0.4-0.5 percentage point in the first month from 3.7 per cent as of the end of last year. Most of the NPLs are from the hire purchase business and from customers assessed qualitatively [as opposed to those assessed simply by due-date compliance],” Aphinant Klewpatinond, president and chairman of the commercial banking business of Kiatnakin Phatra Financial Group, said yesterday.
KK is among the major players in hire purchase loans for vehicles and project finance for developers. The stumbling economy and political uncertainty have taken a toll on the bank in terms of NPLs and flat loan growth.
Loans become non-performing after being delinquent for 90 days, but amid the challenges the bank has classified as qualitative NPLs to customers who have paid auto loans by the due date but defaulted on personal loans with the bank, for example.
Some developers have witnessed delayed transfers from buyers, so the developers cannot repay debt by the due date. That is regarded as a qualitative NPL at the bank.
NPLs from qualitative customers amount to about Bt100 million.
KK raised the minimum down payment for auto loans to 15 per cent from 5-10 per cent and limited term loans to five years and used vehicle loans to nine years.
Last year, KK repossessed 12,000 used vehicles against the average of 5,000 units a year.
Used cars account for 50 per cent of hire purchase loans, which are 70 per cent of the loan portfolio.
The bank will focus more on new-car and cash-for-cars products, as well as car buyers in Bangkok, because the capital represents only 30 per cent of its customer base.
The bank is closely monitoring NPLs from farmers, who were the main customer base before the merger with Phatra Capital.
“Before the merger, KK tapped non-salary workers and the provincial market, but we plan to expand our customer base to salary workers and Bangkok to diversify risk,” he said.
The bank will provide project loans to existing developers and low-rise projects rather than high-rise projects to control risk. However, the existing customers from this segment are also slowing down project launches and some projects with low pre-sales have been suspended and down payments refunded to buyers.
Chavalit Chindavanig, head of finance and budgeting, said the bank had taken loan-loss provisions against qualitative NPL customers.
Last year, KK set aside extra reserves of Bt805 million.
Aphinant said the prolonged political unrest has seriously weakened the economy, and the bank’s loan growth this year might be in the single digits from the previous target of 21 per cent, which was based on GDP growth of 4.3 per cent.
Last year, KK reported loan growth of 12.9 per cent.