Kasikorn Leasing is strongly focusing on auto refinance in order to boost its bottom line, because the company no longer penetrates the used-car market as several hire-purchase lenders are doing.
KL plans to double its auto-refinance portfolio in the next two to three years from 9 per cent of present overall lending, Surat Leelataviwat, deputy managing director and current acting MD, said yesterday.
The company’s auto-refinance portfolio stands at around Bt8 billion, out of total outstanding lending of Bt88.06 billion.
New-car loans represent 60 per cent of the loan portfolio, followed by fleet vehicles at 26 per cent. Lending for floor-plan dealerships accounts for the remaining 5 per cent
The Kingdom’s auto-refinance market this year is expected to grow by 14-17 per cent. KL, however, expects its overall business to expand by about 50 per cent this year as its auto-refinance contribution is relatively small, he said.
KL until relatively recently also offered used-car loans, but found that this segment of the market was too risky and led to a higher level of bad debt than the new-vehicle segment.
The company, therefore, ended its business in the used-car segment and offered auto refinance instead, as borrowers have more certain income and are not burdened with monthly instalment payments, he explained.
The main channel for attracting auto-refinance businesses is the nationwide branch network of KL’s parent, Kasikornbank. The bank has more than 1,000 branches, against just 20 for KL.
The company will also rely on the 3,000 telesales staff of KBank to offer its auto-refinance products, apart from their mainstream offering of the bank’s personal loans and credit cards, said Surat.
Moreover, the interest rate for auto refinance is more attractive than that for unsecured loans for customers who own vehicles.
Auto refinancing is a high-yield loan, he said, adding that it equates to the yield from loans for five new cars.
KL is attaching more importance to net profit this year, even though new lending cannot grow by as much the company would like, he said. Much of the net profit comes from fee income, which is contributed by its wholly owned insurance-broking subsidiary.
KL targets net profit of Bt470 million this year, having booked Bt247 million in the first half, said the acting MD.
Outstanding lending at year-end might expand by just 3-4 per cent because, apart from the slowdown in the purchase of new vehicles, auto dealers have reduced inventories, which impacts on the company’s dealership floor-plan lending, he said.
Surat said a sure-fire indicator of whether the domestic new-car market was picking up would be Asean’s largest automotive trade show, which takes place at Bitec next month. Hire-purchase lenders taking part in the event are expected to offer attractive campaigns.
However, if auto sales at the fair do not recover, hire-purchase companies and auto dealers at the next major event – the year-end motor show – could face a significant challenge in boosting sales and lending, he warned.