Kiatnakin Bank will focus on developers and distributors to reduce risks from SMEs

The economic slowdown and high household debt have hurt small and medium real estate developers. Kiatnakin Bank is a major player in this segment.

Homebuyers need mortgage loans but have insufficient financial resources to make the instalments, so many housing projects of SME developers have run into delays in transferring units, Sarawut Charuchinda, first executive vice president and head of the commercial lending group, said last week.

The bank has warned SMEs to be careful in developing residential projects, especially condominiums, which require huge investment and take longer to construct than low-rise housing.

The bank should move to service listed developers, as they have their own capital and want to have many lenders supporting their projects.

Loans to listed developers might carry a lower margin but they are safer for the bank.

The bank believes it can sustain its spreads, as the low interest rate trend is bringing its cost of funds down.

Residential project loans at Bt27 billion accounted for 60 per cent of KK’s commercial loan portfolio of Bt48 billion last year.

The bank targets growth of 15 per cent in residential project loans this year after witnessing a drop last year, as it believes its strategy of catering to listed developers will help strengthen its loan portfolio.

High debt has hobbled mid- to low-income households, so several listed developers have shifted to high-end projects.

The bank will draw up a watch list of SME developers that are not undergoing debt restructuring by sending a team to offer assistance and solutions to defend against an increase in non-performing loans.

The bank’s NPLs stand at 10 per cent, which is probably high, but if developers can quickly move their inventory, they can repay debt rapidly and NPLs will gradually come down.

Starting last year, the bank has been focusing on lending to equipment and building material firms that are the suppliers of developers. Loans to this segment amount to about Bt400 million-Bt500 million.

“This industry will benefit from the government’s policy even though its projects might not get off the ground soon.

“All construction projects, of both the government and private sectors, require equipment and construction materials, so this business has a positive outlook.

“We target loans of Bt1.2 billion-Bt1.3 billion from the equipment and building materials industry this year,” he said.

The commercial lending group also finances new and used car dealers. Its floor plan business is not expected to expand this year, as the used car business has not yet returned to normal.

Its floor-plan financing business was worth about Bt3.2 billion-Bt3.3 billion.