Personal loans to see second year of single-digit growth

Non-performing personal loans in the banking system have risen since the end of last year, and the overall level is now 5 per cent. For non-banks, the NPL (non-performing loan) rate in this category is 4.8 per cent, also an increase.

Krungthai Card (KTC) is weathering the storm relatively well, as its NPL rate is only 1.1 per cent, said Sudaporn Janwatanagool, executive vice president for personal loans.

She said that because of the economic slowdown and lower purchasing power, personal loans in the financial system in the first five months expanded by only 4.1 per cent to Bt315.50 billion year on year. For non-banks, the growth was 6.2 per cent, and 2.5 per cent in the banking system.

KTC witnessed growth in outstanding loans of 6.1 per cent to Bt16.65 billion year on year.

The current drought has increased pressure on consumers in the agricultural sector, so the overall level of household debt has been unable to improve, and 2015 will be another year of single-digit growth for the personal-loan industry.

Last year, the industry witnessed single-digit growth for the first time in several years because of the political unrest that affected consumer confidence.

This year, while the political situation has stabilised for now, the global economic slowdown has hit Thai’s gross domestic product. This together with the high household debt has encouraged several financial institutions to be more cautious on approvals for personal loans. At the same time, people have been more cautious with their spending.

The approval rate for personal loans among banks has decreased from an average of 50 per cent to 30-40 per cent.

At KTC, the approval rate is 30 per cent. Sudaporn said the company had acquired 58,000 new customers in the first half of the year, lower than the target of 64,000.

For the full year, it targets 146,000 new customers and 15-per-cent growth in outstanding loans to Bt18.9 billion.

At present, KTC has a customer base in the personal-loan business of 710,000.

Adisorn Sermchaiwong, senior executive vice president of CIMB Thai Bank, said it had shifted focus to customers who have monthly income of Bt20,000 by offering loans at 18-per-cent interest per annum, down from the normal 28 per cent. But customers opting for such loans must repay all debt with the bank within three years.

Since it started the programme, the rate of new NPLs has improved, he said. For personal loans, the NPL rate at CIMBT is 4 per cent, and the bank is attempting to keep the rate at no more than 4.5 per cent by the end of this year.

He said monthly applications for personal loans had dropped this year because low-income people have recognised that they don’t have sufficient ability to pay debt.

CIMBT does not expect new personal loans this year to reach the target of Bt10 billion, and now believes the actual figure will be between Bt6 billion and Bt7 billion.