KTB Leasing bids to stabilise used-car prices
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In talks with partner on raising standards, cutting down NPL rate
Krungthai Bank’s leasing arm is talking with a strategic partner in the used-car business to raise the standards of this segment and trim non-performing loans.
“The new programme is aimed at helping buyers get quality vehicles for reasonable prices.
That will help us get quality borrowers and the NPLs from used cars will be reduced,” Pinyawat Chantrakantanond, managing director of KTB Leasing, said yesterday.
The details of the new business model will be available late this month, he said.
The company wants help screening buyers after experiencing sour loans due to the lack of standards in the Bt300-billion used-car market, which has spawned speculation.
The market is large, but has problems with price benchmarking and the actual objective of trading.
For example, sellers don’t know the real value of their vehicle, so they accept a low offer from used-car lots. Then the dealer sets a high price for the vehicle to be resold to a new buyer.
KTB Leasing did not actively pursue used-car loans because of the rise in NPLs and the dubious methods of setting the prices of such vehicles. Its used-car loans have fallen to 12-13 per cent from 15 per cent of its portfolio this year.
About 1.9 per cent of its portfolio is NPLs, all from used-car loans.
The used-car NPL ratio in the instalment-loan industry is more than 10 per cent.
If the new business model is welcomed by business operators and borrowers, bad debt should sink below 5 per cent.
Because of the slowdown in the used-car market, KTB Leasing decided to enter the cash-for-car business on August 1. Vehicle owners can receive cash only one
day after submitting a loan application.
Cash-for-car loans are expected to account for 10 per cent of the company’s new loans and are targeted to reach 25 per cent in three years.
Retail loans are expected to rise to 55 per cent in one or two years from 50 per cent thanks mainly to the cash-for-car business, while lending to operators will decline to 45 per cent from 50 per cent.
KTB Leasing expects its portfolio next year will rise to Bt80 billion from the targeted Bt60 billion this year.
