Card providers see lower interest income
CHANGES TO LEGISLATION covering credit cards becoming effective next July is expected to lower interest income from this source, as interest will be calculated from the payment-due date instead of the date of the initial transaction.
Kasikornbank executive vice president Chatchai Payuhanaveechai said credit-card lenders had received interest income from revolving credit, as only half of card users pay off their full balance when due.
Industry-wide, total outstanding credit-card lending is between Bt260 billion and Bt270 billion, of which revolving credit is Bt130 billion to Bt140 billion.
Therefore, the industry will earn interest income of Bt26 billion. But under the new law, credit-card lenders are expected to see their annual interest income decline by about Bt3 billion.
KBank expects to lose interest income of Bt300 million to Bt500 million per year based on revolving credit of Bt25 billion to Bt30 billion. The bank has outstanding credit-card loans of Bt50 billion to Bt60 billion from a total base of 2 million cards.
KBank is ranked No 2 in the credit-card industry, while Bank of Ayudhya is the market leader with 3.2 million cards. Thakorn Piyapan, managing director of Ayudhya Capital Services or Krungsri Consumer, said the new legislation would have an impact on its credit-card revenue.
At Krungsri, revolving credit is 65 per cent of total outstanding loans of about Bt105 billion.
He added that household debt did not influence the credit-card business but the company had adjusted the qualification criteria for personal loans, increasing the minimum monthly income for new customers from Bt8,000 to Bt10,000 on October 1 after finding there was a rising debt-service ratio among borrowers with a monthly income of no more than Bt8,000.
Krungthai Card, No 5 in the market by credit-card base, has not calculated the impact of the new law yet, but is certain it will pull down interest income, said Pittaya Vorapanyasakul, executive vice president for credit-card business.
Revolving credit at KTC is 70 per cent of total outstanding loans.
She said the company would have to adjust its strategies to deal with the new law, attempting to increase the proportion of credit-card customers with upper-middle incomes. To balance its portfolio and control the quality of its assets, KTC hopes to increase its focus on customers with monthly incomes of Bt40,000-Bt200,000, who currently are 15 per cent of the KTC card base.
Customers with monthly incomes of Bt15,000-Bt40,000 make up 80 per cent. The rest are high-end customers who have monthly incomes of more than Bt200,000. It will try to raise the proportion of customers in the Bt40,000-Bt200,000 earning category.
KTC targets issuing 400,000 new cards in 2014 for a total 2 million. Most of the new cards will go to first-jobbers and upper-medium-income customers.
