KTB may reduce lending, hike reserves amid rising bad loans
Krungthai Bank might rein in lending and beef up reserves for problem loans if the uptrend in non-performing loans does not show signs of levelling off.
"We have been tracking where new NPLs are coming from – from what kind of customers and what kind of products – in order to tackle future bad loans," Vorapak Tanyawong, president of KTB, said yesterday.
Even though the bank’s loan portfolio in the first quarter of this year increased slightly, growth was below target because of the high base last year, from a surge in credit, and massive repayments by state customers, he said.
Amid the economic uncertainty, the private sector is not investing much, as it has to wait and see if the government’s mega-projects get off the ground, so loans to state agencies and corporate customers in the first quarter dropped. KTB was the only major bank posting double-digit loan growth last year, at 11 per cent.
KTB projected its loan growth at 1.5 times expected 2015 growth in gross domestic product, but after the first three months, the bank no longer sees GDP growth reaching 4 per cent, so it might consider cutting its loan-growth forecast for this year. Last year, the bank raised its normalised provisions for possible loan losses from Bt500 million per month to Bt700 million, but NPLs in the first three months edged up from the end of last year. This was mainly because of souring loans to retail customers with monthly incomes lower than Bt15,000 and to medium-sized enterprises.
"We have sent collection teams to follow up on the new NPL customers and offer solutions to them. If NPLs can’t be improved, we might consider setting aside more allowances for doubtful debt," he said.
Consumer sentiment will recover when the government starts implementing its mega-projects, which are likely to be the only hope for the Thai economy. Foreign direct investment is not expected to pour in any time soon.
The economic mood has a critical impact on loan growth for the banking industry. Loans are expected to slow down further in the second half.
Consumer sentiment is not picking up yet and exports, which represent 70 per cent of GDP, are sluggish because of the impact from the global market.
