TBank eyes small, mid-size corporates
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Turning from hire-purchase to financial products, services in bid to boost spread, fee income
Thanachart Bank is expanding its role from the leader of the hire-purchase (lease to own) business to a bank for mid-size corporations and small businesses, as these new customers are helping to boost not only its spread but also fee income.
“We do not want to grant only loans. We want also to offer financial products and services that generate fee income and help the transactions of customers such as overdraft accounts, letters of credit, foreign exchange and risk management,” Somjate Moosirilert, president and chief executive officer, said yesterday.
Thanachart Bank’s roots lie in the instalment-loan business, but it recognises that even though auto loans are among the highest-yielding products, the spread on this product is not stable because of the furious competition.
High-yield customers such as small businesses and mid-size corporations could drive the bank’s spread up from 2.46 per cent last year.
Companies listed on the Market for Alternative Investment or those on the Stock Exchange of Thailand that are below the SET100 or show annual sales of Bt1 billion to Bt3 billion are the customer target.
TBank plans to make itself valuable to mid-size corporations and small businesses by helping them from the first stage of doing business.
A small business is defined as a general business with commercial buildings and a long history. The bank will lend up to Bt10 million to this kind of customer.
Small businesses are not risky customers, since the key criteria for them to qualify for a loan are long experience and collateral assets. This group is not expected to create non-performing loans (NPLs).
TBank plans to cut total NPLs to 3.3 per cent from 4.3 per cent last year by helping customers with debt restructuring, Somjate said.
Even though the bank is focusing on corporate customers, their weighting in the loan portfolio is unchanged because growth is coming from the instalment-loan market. The growth of the economy still depends on domestic consumption.
The bank’s loan breakdown between retail and corporate is 65:35.
The bank’s overall loan growth this year is targeted at 10-12 per cent from outstanding loans of Bt755.33 billion last year.
Another key part of this year’s strategy is to promote bancassurance after selling Thanachart Life Assurance to Prudential Thailand for Bt18 billion. Under the contract, TBank is the exclusive bancassurance partner of Prudential.
LIfe insurance
The bank will book an extraordinary gain next quarter from selling its life-insurance business. That will help the bank’s BIS ratio (that between the risk-bearing capital and risk-weighted assets) improve to 16 per cent from 14 per cent.
The remaining life-insurance unit – Siam City Life Assurance – has drawn interest from insurers. The bank is considering selling the unit once it gets an attractive proposal.
The bank will keep only its non-life insurance company, Thanachart Insurance, as this unit can support auto loans.
The sale of Thanachart Life Assurance is also helping to raise the bank’s coverage ratio (ability to meet its financial obligations) to 90 per cent from 74 per cent. However, its coverage ratio is still behind several banks that have exceeded 100 per cent.
TBank was upgraded to a commercial bank just a few years ago, unlike major banks, which have enjoyed high profits in the past five to seven years, which were enough to raise their coverage ratio.
However, TBank is confident its coverage ratio is strong enough to deal with the NPLs, Somjate said.
