Tisco expects interest income to fuel profits
Tisco Financial Group expects to derive most of its profits this year from interest income in line with loan growth after interest rates have become more stable than in previous years.
Group chief executive Oranuch Apisaksirikul said Tisco was relying on growth in retail lending, particularly instalment loans. Even though the outlook on vehicle sales this year is for a slowdown, this is merely a return to normal after unusual growth sparked by last year’s first-car tax-break programme.
She said interest income in previous years had not necessarily widened much in line with loan growth because of the fluctuation in interest rates. This year, however, the rates seem stable, allowing the banking sector to manage the cost of funds. As a result, Tisco’s profits from interest income this year should be better than in 2012.
The Bank of Thailand’s policy rate now is 2.5 per cent, and many brokerages expect it stay at that level for the rest of the year. The policy rate is unlikely to be increased because the Thai economy is fragile, Oranuch said.
Tisco recorded net profit of Bt2.31 billion in the first six months against Bt1.75 billion in the same period last year. Brokerage houses expect Tisco’s profitability in the second half to come under high pressure from the weakening of new auto loans in line with slower car sales.
Tisco has maintained its business plan, including the loan-growth target of 15-20 per cent, despite slower growth of the economy as well as the slowdown in vehicle sales and the rising trend of non-performing loans (NPLs) for used cars.
“We anticipated before that the economy this year would grow by 4.5 per cent, lower than other houses’ [predictions], because the [government] infrastructure project worth Bt2 trillion [might] not happen this year. Meanwhile, vehicle sales will not be as bright as last year and the used-car market will be affected by the new-car-buyer scheme,” she said.
The National Economic and Social Development Board has lowered its 2013 GDP growth forecast to 3.8-4.3 per cent, but Tisco believes growth will not be lower than 4 per cent as it expects the situation to recover in the current third quarter, including the auto market.
Oranuch said bad used-car loans pushed its NPL rate to 1.45 per cent as at the end of the second quarter from 1.28 per cent.
The NPL rate could climb a bit more by year-end because of unsold repossessed vehicles, as the group does not want to lose too much on inventory.
She expects the used-car market to recover in the next two quarters.
Tisco does not offer debt restructuring to its used-car borrowers but it has relaxed some conditions to help existing customers and has slowed new lending.
