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Thanachart banking on corporate and SME sectors as auto lending remains in doldrums

THANACHART BANK, the market leader in hire-purchase lending, will have to rely on the corporate and SME sectors to achieve its overall loan-growth target for the year if the market for new auto loans fails to pick up by the fourth quarter.

The bank, which will report its financial performance for the second quarter tomorrow, acknowledges there was flat lending growth in the first half of the year, with repayments of existing auto loans exceeding new auto lending, executive vice president Anuwat Luengtawekul said yesterday.

Hire purchase (lease to own) represents 55 per cent of TBank's loan portfolio of Bt790 billion, but given the negative outlook for the auto market - particularly for used vehicles - TBank said its new auto lending in the first six months had dropped by 2-3 per cent from the same period last year.

TBank has reduced its lending to used-car buyers - as have other lenders - to avoid the impact of vehicle-repossession losses, while demand for new cars has not yet normalised, he said.

Loans for used-car purchases and refinancing together account for 30 per cent of TBank's turnover, with the remainder contributed by new-vehicle business.

Anuwat said the bank's outstanding loans from hire purchase in the first half would drop slightly from the Bt400-billion level at the end of last year.

However, its loan-growth target of 5-6 per cent for the full year will be maintained, because there is still good growth in the corporate and SME (small and medium-sized enterprise) sectors, which are areas in which the bank has been aggressively capturing new clients, he said.

While loan growth in the second half will mainly be from the corporate and SME sectors, TBank is still optimistic that demand for auto loans will resume in the fourth quarter, which is the high sales season in the auto sector, he added.

In the first half, TBank signed loans for many corporates, especially in the property-development sector.

The bank is one of two financial institutions to support loans of Bt25 billion for the IconSiam projects, which are being developed by Siam Piwat, Magnolia Quality Development Corp and Charoen Pokphand Group.

"We have clear segments in tapping corporate and SME clients, and even though the margin from corporate clients is lower than the high yield from hire purchase, our net interest margin this year is healthy due to our funding-cost management and stabilised interest rates," said the executive.

TBank's net interest margin declined to 2.71 per cent in the first quarter, from 2.78 per cent as at the end of last year.

Meanwhile, the bank is attempting to lower its non-performing loans as it currently has the highest NPL ratio among its peers at 4.68 per cent. Its NPL ratio from hire purchase is 2 per cent.

"We plan to control NPLs at 4 per cent by the end of this year. We will offer debt restructuring to clients with cash flow, and will divest bad debts to debt-collection companies instead," said Anuwat.


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