Published on July 26, 2006 - Bank will maintain 'affordable' lending despite profit plunge, says acting chief

Government Housing Bank (GHB) will offer borrowers new fixed-rate housing loans, despite suffering a sharp drop in profits in the first half of the year, executives from the largest mortgage lender said yesterday.

Profits fell 40.68 per cent to Bt1.63 billion in the first six months due largely to rises in funding costs since the end of last year, Khan Prachuabmoh, the bank's outgoing president said.

Last year, the bank was trapped by the low fixed-rate packages, which it had earlier offered to borrowers, while poor liquidity in the money market boosted deposit rates and consequently raised the bank's funding cost, said Khan who will leave his post at the end of this month.

Chatchai Virameteekul, executive vice chairman, who will assume the role of acting president, said the fall in profit was caused by its lower-than-the-market rate hikes in order to support lower and middle-income groups to cope with rising interest rates and oil prices. The bank will continue to offer affordable rates to its customers, and is therefore preparing to offer new fixed-rate deals to customers whose existing ones are due to end, said Chatchai.

Most commercial banks have cut back offers of fixed-rate mortgages due to the rising interest rate.

GHB's new fixed rates may be higher than those previously offered, but will be lower than the average floating rates currently on offer, Chatchai said. The bank's minimum retail rate (MRR) is currently about 7.75 per cent.

As acting president over the next two months, Chatchai said he plans to dispose of non-performing loans worth about Bt12 billion and issue securitised bonds worth Bt20 billion.

Khan said it was likely the interest rate would not rise again this year, and if it did, it should only be by 25 basis points. The interest rate may peak and could be stabilised by early next year, he said.

The outgoing president said he expected demand for town houses and condominiums to remain high, as home-buyers continue to take a cautious approach to spending. The greatest demand will be for properties priced up to Bt3 million, he said.

Although the property sector is on a down cycle, there would be no collapse as witnessed during the 1997-financial crisis, Khan said.

GHB's recorded Bt56.72 billion in new lending in the first six months of the year. Outstanding loans at the end of June were Bt505.44 billion, up 16.4 per cent on the same period last year. The bank's share of the new-lending market was 49.9 per cent and outstanding loans stood at 40 per cent at the end of March.

Its non-performing loans totalled Bt30.9 billion - 6.12 per cent of outstanding loans - and its non-performing assets were Bt8.52 billion.

At the end of June the bank had deposits of Bt434.98 billion, up 18.79 per cent year on year. And with its increase in liquidity, the bank last month lowered its one-year deposit rate to 5 per cent from 5.5 per cent, Khan said.

Wichit Chaitrong
The Nation