Siam Commercial Bank is depending solely on the mortgage business to drive retail loans this year after it noticed signs of a pickup in housing loans last month.
Other retail segments such as auto loans and unsecured loans are likely to be fragile in SCB’s view, Yol Phokasub, a senior executive vice president and head of retail and business banking, said yesterday.
SCB last week reported that its total loans in the first three months of this year were flat, while retail banking contracted 1.2 per cent on quarter but expanded 8.8 per cent year on year.
Outstanding first-quarter retail loans dropped to Bt747.51 billion from Bt756.85 billion as of the end of last year.
Retail accounts for 44 per cent of the total loan portfolio at SCB. Home loans at Bt485 billion are the lion’s share of the retail portfolio.
New retail loans are expected at Bt20 billion-Bt35 billion this year, mainly from the mortgage segment rather than the auto segment, which accounts for 11 per cent of retail banking.
The auto loan business may see no growth this year due to the gloomy outlook for vehicle sales and the used car market situation.
Outstanding auto loans at the end of the first quarter were Bt180 billion and should stay at that level throughout this year because car loans tend to be repaid quickly.
Many property projects in Bangkok are being transferred to buyers. That could shore up mortgage loans in the second half this year and SCB’s retail banking.
Pikun Srimahunt, a first executive vice president in charge of mortgage lending, has said that the bank will focus more on condominium projects to achieve loans of Bt90 billion-Bt100 billion.
The retail lending business cannot expand much because consumer debt is mounting, while household incomes are stable. The bank has also tightened lending criteria in a move to tackle the bad debt problem.
“Yields could be slightly down because we have become more selective in approving loans but we have controlled the cost of funds by reducing deposit campaigns,” he said.
Auto loans are one segment that the bank has to beware of especially used car loans.
It must keep non-performing auto loans at below 2 per cent of total loans because if they go higher than that, it will suffer a loss.