Banks more wary about consumer lending amid rising household debt

Pimonwan Mahujchariyawong, deputy managing director of Kasikorn Research Centre (KRC), said banks were now more wary about providing home loans to customers who already have a debt burden as a result of buying a vehicle on credit, and to borrowers who want to buy additional properties.
Banks are showing that they are concerned about the high level of household debt, despite the goal of expanding their loan portfolios, she said. National household debt in the first quarter stood at more than Bt8 trillion, accounting for 77.4 per cent of gross domestic product.
Kasikornbank earlier announced that it had stopped lending to customers wanting to borrow in order to buy a third home, and that it was focused on customers with a monthly income of at least Bt15,000 for unsecured loans.Krung Thai Bank (KTB), meanwhile, will not grant a mortgage to second-home buyers if their cash flow is deemed to be insufficient.
The bank has also assigned KTB Leasing to focus more on providing auto loans to civil servants with a view to maintaining loan growth in the segment following the ending of the government’s first-car buyer scheme, said Weidt Nuchjalearn, senior executive vice president of KTB.
The bank will also be more cautious when it comes to granting loans to self-employed individuals in risky sectors, he said.“We have improved the information system to help screen customers, and are also focusing on existing customers to prevent refinancing from other banks,” he added.
Moreover, lower consumption following the end of government stimulus measures and a drop in economic growth this year, has convinced KTB to adjust its strategies, said the executive.
The bank this year aims to expand to 30 per cent the |loan proportion accounted for by small businesses with annual sales of no more than Bt20 million, from 20 per |cent last year. Targeted businesses are suppliers to government projects, and those involved in food and agricultural products.

SLOWER LOAN GROWTH
Siwat Luangsomboon, head of KRC’s Money and Banking Research Division, said the research house is considering lowering its 2013 loan-growth estimate for the banking industry from the current level of 10-13 per cent.
The key drivers present last year are no longer applicable, which suggests loan growth is returning to the normal level, he said.
Retail lending this year is expected to expand by 17-19 per cent, against 22.6 per cent last year, while corporate loan growth is expected to fall to 7-9 per cent from 11 per cent, and loan growth for small and medium-sized enterprises is likely to remain at 10 per cent, he added.
Retail loan growth is expected to slow significantly, due to reduced hire-purchase lending following the ending of the first-car programme.