Kiatnakin Bank expects NPL rate to hit 7% in second quarter
Kiatnakin Bank's non-performing-loan ratio is likely to keep climbing to 7 per cent this quarter from 6.5 per cent last quarter because of the continuing economic deceleration and pressure from high household debt on small and medium-sized residential dev
Aphinant Klewptinond, president of KK, said yesterday that the 7-per-cent level should be the peak and the bank hopes NPLs will gradually decline in the second half, as special-mention loans are showing a positive trend.
Because of the high household debt, SME developers have difficulty selling their housing units, as buyers are loaded down by debt, and banks have tightened up credit approvals to customers.
If the economy starts picking up, banks will have more confidence in financing homeowners and the situation will recover for project-loan clients of KK.
Last month, the bank introduced a home equity product called HomeQuickCash for homeowners who don’t have to make loan instalments and want money.
To prevent new NPLs, the bank is offering help such as rescheduling and extending extra credit to special mention and non-performing customers, as it believes that if customers have more cash flow, their businesses could pass through the tough times and will not turn into NPLs.
KK has the highest NPL ratio in the business. However, 1 per cent of the 6.5 per cent is non-performing assets that the bank purchased since the economic crisis for resale at a profit.
The bank also operates in high-risk markets, especially used-car loans, which yield about 8 per cent versus 6 per cent for new-car loans.
The higher interest income can absorb the NPLs.
KK’s NPLs should be at 4 per cent, but the bank does not expect to see this level this year as long as the economy is sluggish.
In the first three months, KK’s lending dropped by 2 per cent even though it targets loan growth of 6 per cent for the full year.
The bank might 2-per-cent loan growth this year, but auto loans will not be a key driver because repayments from the past two years from customers under the previous elected government’s first-car tax-break scheme will outstrip new loans.
Auto lending account for 70 per cent of KK’s loan portfolio of Bt181.23 billion.
All instalment lenders have projected auto sales this year turning positive, but the first quarter showed a backslide of 12 per cent. The slower-than-expected recovery has put pressure on the new-car lending industry.
KK’s profitability this year will depend on fee-based and capital-market income, but large loan-loss provisions continue to squeeze its profit and those of other banks that are not players in the corporate market, Aphinant said.
