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Tisco braces for single-digit lending growth

TISCO FINANCIAL GROUP, a major player in the hire-purchase market, might see loan growth dwindle to single digits this year because of a decline in car sales and the dampening of consumer and business confidence amid the political deadlock.

In an exclusive interview with The Nation, group chief executive Oranuch Apisaksirikul said the effect from the political unrest on Tisco was more serious than the major flood three years ago. The effects of that disaster ended quickly, while it remains anyone's guess when the current unrest will subside.

Tisco has witnessed double-digit growth for many years, especially in 2012 when its lending surged by 34 per cent, mainly because of the government's first-car-buyer scheme. However, that tax-break programme affected the used-car market last year and has also dampened demand for new cars this year.

Car sales this year should average around 90,000 a month, but so far the monthly rate has been only 60,000, so it would be a challenge for 2014 sales to reach 1 million units. Several experts in the auto market have predicted that domestic sales could reach 1.2 million to 1.3 million units this year.

About 70 per cent of Tisco's loan portfolio is retail, of which half is hire-purchase, so the group is unable to avoid the effect of lower car sales, and lending growth in the first quarter should drop as well, Oranuch acknowledged.

"We do not think auto sales will recover even though the Motor Show will offer campaigns, because the problem affecting the auto market is that buyer sentiment has not recovered."

Previously, Tisco expected the government's planned Bt2-trillion infrastructure mega-project would fuel the business, but the budget bill was sunk by the Constitutional Court at a time when auto sales were weak, and it seemed lending growth would fall to 8-9 per cent. However, Oranuch sees that as a reasonable growth figure under the circumstances.

"So far we have yet to revise this target as we want to wait and see how the political situation develops in the next few months. If it is still unsolved by that time, our annualised growth may be flat," she said.

She added that the Thai economy was experiencing a temporary pause, rather than stalling or backtracking, because exports remained the hope for carrying on growth. Meanwhile, global markets' revival was an opportunity for corporates planning to do business outside the country.

As well, the massive fund outflows feared by some are unlikely because foreign investors were more understanding of Thai politics than in the past, she said.

To deal with this economic slump, Tisco had no need to scale down its hire-purchase business but is improving its four pillars - personal banking, corporate and SME banking, wealth management and operational systems - and create new growth strategies.

"Tisco is increasing focus on fee income such as bancassurance during the lending slowdown," she noted as just one example of the adjustments the bank was making.

Fee income and high-yield loans such as auto cash and auto-loan refinancing are ways to keep Tisco profitable. She added that when lending slowed, the quality of borrowers would improve, which meant the bank could save costs by setting normal loan-loss provisions. Therefore, net profit and return on equity this year should not be lower than last year.

The downtrend of interest rates and the recent policy-rate cut by the central bank helped improve Tisco's margins, while the lower deposit competition in line with the slower growth of lending helped the bank manage the cost of funding. "We are able to expand our individual wealth customer base during a period of lower interest rates, and we aim to capture more customers who have deposits from Bt10-20 million," she said.


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