Banks are not worrying about the level of household debt yet as the majority of their customer base consists of higher-income people, a segment that has a low ratio of debt to gross domestic product.
Yuttachai Teyarachakul, United Overseas Bank (Thai) executive director of personal financial services, said the debt-to-GDP ratio of consumers with monthly incomes of more than Bt20,000 was 40 per cent. The overall ratio is at least 77 per cent because that figure includes non-banks, cooperatives, and loan sharks.
The Bank of Thailand yesterday reported that household debt in the first quarter surged by 16.24 per cent year on year, with outstanding loans standing at Bt8.97 trillion, or 77-78 per cent of GDP. Debt from credit cards and personal loans alone grew by 33.2 per cent.
At the end of the first quarter, outstanding loans of commercial banks to households were Bt3.76 trillion, up by 20.68 per cent from Bt3.11 trillion from the same period of 2012. Outstanding loans from the state-owned banks were Bt2.53 trillion, an increase of 7.6 per cent year on year, and those from cooperatives were Bt1.35 trillion, up by 15.1 per cent. The securities companies showed the highest growth of outstanding loans, 67.48 per cent to Bt56.8 billion.
Yuttachai said UOB was aware of the debt burden of consumers, and rejected credit-card applicants who have high debt-to-income ratios. The credit-card approval rate year to date has declined to 40 per cent from 45 per cent last year, and most applicants have incomes lower than Bt25,000 a month, he said.
About 70 per cent the 600,000 credit cards issued by UOB (Thai) are held by people with monthly incomes of more than Bt25,000.
He noted that the bank was seeing a slowdown in consumption, which might affect card issuance and spending, so it would not be easy to issue 60,000 new cards this year as projected. UOB will stress programmes that secure loyalty among existing cardholders.
UOB (Thai) is the only bank that issues gender-specific credit cards, having found that spending by women on beauty and heath was highly active.
The Lady Credit Card accounts for 25 per cent of the total, and this year the bank aims to add 30,000 new ones to the current Lady card total of 150,000.
Spending via UOB credit cards in the first half of this year grew by 18 per cent, higher than the projected 15 per cent. However, overall spending through its credit cards throughout this year is expected to grow by only 14 per cent because of lower consumer sentiment in the second half, Yuttachai said.
Chatchai Payuhanaveechai, executive vice president at Kasikornbank, said that even though the rate of non-performing loans among its credit-card customers was only 1.4 per cent, lower than 2.2 per cent in industry, the bank planned to refuse credit cards to customers who already have several cards and credit lines of more than four times their income.
The bank has a policy of offering credit lines of two and a half to three times cardholders’ incomes, lower than the Bank of Thailand’s limit of five times.
At present, KBank has 2.8 million credit cards in circulation and aims to expand that to 3.1 million this year. About 45 per cent of the cards are held by customers who have monthly incomes of Bt30,000-Bt40,000.
The bank this year targets issuing 500,000 new credit cards including corporate cards.
Yesterday, KBank in cooperation with PTG Energy launched the PT Max Fleet Card for transport companies, the majority customers of PT fuel stations.
The bank expects to issue 16,500 cards, which will account for expenditure of Bt25.6 billion over five years.
KBank is a major player in corporate cards, with a total of 60,000 held by 3,000-4,000 companies. Monthly spending via corporate cards is Bt20,000-Bt50,000, against an average of Bt17,000 by individuals.
“We hope total spending by new cardholders will grow by 20 per cent and spending by existing customers by 5 per cent to maintain a growth rate of 25 per cent, higher than the expected market growth of 12 per cent,” Chatchai said.
Outstanding credit-card debt at KBank this year is projected at Bt280 billion after recording Bt110 billion in the first half.