Personal-loan providers cool to NPLs
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The level of non-performing loans (NPLs) from personal lending in the current quarter could be higher than in the first three months of the year, due to seasonal spending on education and home appliances, consumer-finance lenders said yesterday.
Increased consumer spending at this time of year is driven largely by purchases of air-conditioners and the start of the new school year.
While there is, therefore, a high chance that NPLs from personal loans will rise, the percentage of NPLs in Kasikornbank’s (KBank) banking and non-banking segments can be maintained at 3 per cent, said executive vice president Chatchai Payahunaveechai.
Of the bank’s four retail lending products – home loans, auto loans, credit cards and personal loans – NPLs from personal loans are the highest at 3 per cent.
However, an overall NPL level of 3 per cent is reasonable, because the interest rates of 20-24 per cent charged to personal-loan customers can cover the writing off of any bad debt.
Personal-loan operators can accept NPLs at 3-5 per cent, he added.
Nayanee Peaugkham, executive vice president for personal loans and sales finance at Krungsri First Choice – part of Bank of Ayudhya – said that even though NPLs would increase slightly as a result of the huge seasonal spending, the company’s current ratio was being maintained because most customers in its portfolio practised good repayment discipline.
The overall personal-loan market currently amounts to Bt252 billion, or 7 per cent of the retail banking industry.
The personal-loan market generally grows faster than other segments, but this was not the case last year, when auto loans led the way due to the first-car scheme, according to Chartchai.
Personal lending expanded by 18 per cent during the year, while auto loans grew by 34 per cent.
At KBank, NPLs from personal loans stood at 1.9 per cent of outstanding lending of Bt11 billion at year-end, while Krungsri First Choice had NPLs of 2-3 per cent from outstanding personal loans of Bt27 billion.
KBank’s personal-loan provision targets monthly income earners of at least Bt15,000, while Krungsri First Choice allows customers with a monthly income of Bt8,000 to apply for instalment and personal loans.
Chatchai said his bank expected the personal-loan market this year would expand by 11 per cent to Bt280 billion, with the main growth coming from commercial banks due to each institution actively focusing on this segment in order to secure more interest income.
KBank this year projects its outstanding personal lending will grow by 39-42 per cent to Bt13 billion-Bt15 billion, and that the credit lines offered to personal-loan customers will rise to Bt43 billion, from Bt30 billion at the end of last year.
“We entered the personal-loan business only three years ago, so we have room to grow this segment of retail lending, as personal loans currently only account for 3 per cent of our retail portfolio,” said Chatchai.
Krungsri First Choice, meanwhile, hopes its outstanding loan this year will grow by 18 per cent to Bt28 billion, with new loan bookings of Bt42.5 billion for an increase of 15 per cent from last year’s level, said Nayanee.
She said the company this year was investing more than Bt10 million in innovative technology to strengthen the personal-loan business in terms of the number of merchant partners and new customers.
For merchants, the company is offering ERM (electronic receipt management) for use with EDC (electronic data capture), which means they no longer need to keep sales slips and Krungsri First Choice will transfer money to them within just one day, compared with seven days under the previous system.
ERM will boost the financial liquidity of merchants and help the company expand the number of merchant dealers this year to 13,000, from around 10,000 at the close of last year, she added.
For customers, Krungsri First Choice has developed a streamlined approval system under which loan applicants receive approval within one day.
