Further year of auto slump would mean continued slowdown
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TISCO FINANCIAL Group's chief executive has expressed concern that the economy will have remained at its current low point for longer than expected if domestic auto sales next year are below 800,000 units
Auto sales came in at less than 800,000 in 2014, and a similar situation is expected this year, after a sales surge to above 1 million units in both 2012 and 2013, accelerated by the elected government’s first-car-buyer scheme.
In the view of Oranuch Apisaksirikul, group CEO of Tisco, auto sales of below 800,000 units per year in 2014 and 2015 were acceptable, as that was the level of annual sales hire-purchase operators had experienced before the arrival of the first-car tax-incentive programme.
However, if sales in 2016 were unable to recover from the previous two years, it would mean the domestic economy had been subdued for a disturbingly long period, she warned.
“What we are worried about is the economy remaining at the bottom for a long time, unless the government can start investment to stimulate it in the second half [of this year] and the economy is able to |pick up in the next 12 months,” she said.
Based on the hope of additional government spending, Tisco should be able to achieve loan growth next year, albeit only single-digit growth, she added.
In the first five months of this year, domestic auto sales experienced a year-on-year drop of 15.9 per cent to 308,787 units, while several automakers and auto lenders have said full-year sales might reach just 750,000 units – compared with the previous forecast of 850,000.
Tisco is a key player in the auto-loan market, and the decline in new-car sales has affected its outstanding auto-lending portfolio, which has dropped by 14 per cent to Bt156.09 billion from Bt182.56 billion at the end of last year.
Debt repayment by first-car-scheme borrowers has exceeded the level of new lending by the group, said Oranuch.
Instalment loans account for 70 per cent of the lending portfolio at Tisco, and the plunge in new auto lending in the first half has resulted in the group’s overall portfolio dropping by 5.1 per cent to Bt249.34 billion.
Amid the slowdown in new lending, it is impossible for the group to escape a fall in its loan portfolio over the full year, she said.
In the base-case scenario, lending this year will drop further over the remaining months because of the ongoing debt repayment by car-loan borrowers, she added.
“However, we have not changed our business plan in the second half, because the situation in the first half was in line with what the group estimated earlier,” said the chief executive.
The group has no need to set aside additional loan-loss provisioning in the second half, as it did in the first six months, because it can manage its existing non-performing loans (NPLs), she said.
Tisco’s NPLs at year-end are expected to be similar to last year’s, at 2.65 per cent. They currently stand at 2.86 per cent.
Having NPLs in the range of 2.6-2.7 per cent is not bad when considering that annual lending growth was 30 per cent over the past two years, she added.
