TMB decides to rely on SME lending
TMB Bank expects spectacular growth for the next three to five years thanks to SME lending, as this category yields the highest margin among the three loan categories.
CEO Boontuck Wungcharoen said last week that the bank sees room to grow in the SME segment as many small business don’t have easy access to funds.
Also, competition in this sector is not that intense.
SMEs account for 35 to 38 per cent of the bank’s loan portfolio, while wholesale loans are the mainstream business with 48 to 50 per cent and retail loans are the smallest proportion at 18 per cent.
SME loans will replace wholesale loans as the main lending business because the bank wants to improve yields and return on equity.
Wholesale loans in three to five years will be 30 per cent and retail loans 20 per cent.
SMEs will be the key driver of interest income. Retail loans are also likely to generate high yields, but the bank might need more time to realise returns on this.
Retail banking consists of unsecured loans and home loans, but the bank plans to add auto loans to the mix.
TMB had initially decided to suspend auto lending due to low margins and furious competition.
Auto loans have fixed rates and maximum terms of four to five years, unlike commercial loans, which have both short and long terms.
The first-car scheme also created headaches for lenders, so this is not the right time for TMB to penetrate this segment.
“We still remain interested in auto loans even with low margins because in doing retail lending, we should have a complete range of products for customers,” he said.
Retail banking should be the segment that generates healthy fee income and product cross-selling opportunities rather than interest income, he added.
An analyst at Asia Plus Securities said loan growth at TMB might miss the target because the bank is balancing its portfolio by shifting the focus from wholesale to SME customers to drive loan yields.
TMB reported loan growth of 2.8 per cent in the first eight months of this year, well behind its target of 10 per cent.
