CIMB Thai eyes more unsecured loans, non-interest
CIMB Thai Bank will focus more on unsecured loans and non-interest income, especially fee income from investment banking, to boost yield.
Subhak Siwaraksa, president and chief executive officer, said the bank acknowledged that unsecured loans yielded 10-25 per cent, unlike housing loans, which yield just 1 per cent in the initial years. However, the bank has to focus on housing loans to reinforce its relationship with clients.
Under the bank’s strategy in the second half, it wants to expand its loan portfolio from retail and small and medium-sized enterprises, and unsecured loans are part of that focus. Interest income from retail loans will sustain a net interest margin of 3.5 per cent.
The bank also will actively expand non-interest income from investment banking.
CIMB Thai has expertise in investment banking, reflected in its role as underwriter and financial adviser of many deals in the first half of this year.
Subhak said that even though the bank has so far seen year-on-year loan growth of just 3.3 per cent, far from the target of 20-30 per cent for the entire year, it would hit the target because loans would be accelerated in the current second half.
Narongchai Wongthanavimok, chief financial officer, added that CIMB Thai hoped to increase the proportion of non-interest income to 40 per cent from the current 33 per cent because the growth of net interest income would mean the bank has to reserve massive capital to back the loans.
It recently increased its capital from Bt2.44 billion to Bt10.65 billion to serve the loan growth and ensure its Bank for International Settlements and Tier 1 ratios.
Subhak said this amount of capital would be able to strengthen loan growth for about two years. However, if the bank can manage its cost-to-income ratio and increase fee income from transactions and investment banking, it will have no need to rely on the increased capital.
Cost-to-income at CIMB Thai Bank is higher than that of the overall banking industry. As of June 30, it was 81 per cent, against 45-55 per cent for the industry.
CIMB Thai Bank yesterday reported net profit of Bt28.67 million for the second quarter, plunging by 88.75 per cent from Bt254.80 million in the same quarter last year.
Subhak said the drop was due mainly to the deposit-insurance premium of 0.47 per cent and the Bt206 million in legal claims paid to a provident fund in accordance with a recent Supreme Court ruling against a defunct financial institution, which was merged into BankThai, the predecessor of CIMB Thai Bank.
