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Tisco says loan growth won't recover this year

Leading car loan provider suffers 4% drop in lending as NPLs climb to 2.27% in H1

Tisco Financial Group, a leading provider of car loans, acknowledges that even though consumer confidence is picking up in the second half, it will not be enough for it post any loan growth this year.

Not only has the prolonged political deadlock affected auto-loan demand, Tisco has suffered losses from used-car repossessions. Its lending dropped by 4 per cent in the first six months compared with the same period last year, while the rate of non-performing loans climbed to 2.27 per cent from below 2 per cent in the past several years.

Group chief executive Oranuch Apisaksirikul said that even though performance in the second quarter was better than in the first and consumer sentiment is recovering, this would be insufficient for overall growth this year.

"Lending throughout this year might drop by 2-3 per cent because we want to sustain our strategy of focusing on returns and risk management," she said.

The expected loan drop this year would be the first for Tisco since the financial crisis in the late 1990s.

Oranuch said Tisco had been giving more importance to corporate lending, as it believes that the cycle of investment will become another engine of the Thai economy in the next few years. Still, after its bad experience from the 1990s financial crises, "the group emphasised hire-purchase, as domestic consumption was the key engine of the Thai economy" after that time, she explained.

Breakdown

According to Tisco's loan-portfolio breakdown as at the end of June, retail loans, mostly for instalment purchases, amounted to Bt195.95 billion, representing 70 per cent, followed by corporate loans of Bt54.60 billion, representing 19.5 per cent.

Auto refinancing is a segment that could grow, and Tisco has expanded this business to the mass market under the Somwang brand upcountry. Tisco also has an auto-refinancing arm named Tisco Auto Cash, which caters to middle-income people.

Several banks that offer auto refinancing to mass clients have created new brands because many customers don't have bank statements and are not familiar with using bank loans, preferring local leasing companies.

Tisco plans to boost the Somwang loan portfolio to Bt5 billion next year from Bt3 billion currently.

Sales of new and used cars are expected to normalise next year and the group could quickly recover, as it has strong relationships with auto dealerships, she said.

Tisco has slowed its financing of used vehicles since the second half of 2013 after that market was altered by the government's first-car scheme, which offered tax breaks to purchasers of new vehicles. Its losses from used-car repossessions should improve in the current second half of the year. However, the prices of used cars are unlikely to rebound quickly as long as the sales campaigns for new cars do not ease up, Oranuch said.

"We will try keeping our profitability from fee income, mainly from bancassurance and brokerage businesses, together with expense management. Net profit this year might be weaker than last year but we are satisfied with the figures," she said.

Last year, Tisco reported net profit of Bt4.25 billion.


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