Kiatnakin offers consumer financing in bid to cut risk exposure
KIATNAKIN Bank (KKP) will diversify its credit business by adding a new consumer finance segment and hopefully minimise its risk exposure and improve its asset quality.
During the economic downturns, banks including KKP have penetrated the hire-purchase market and small and medium-sized enterprises have witnessed a slowdown in growth and rising non-performing loans (NPLs).
KKP’s hire-purchase segment and loans to SME property developers account for 80 per cent of its business.
Because of the economic downturn, the bank had to tighten its loan approvals to SME property developers to tackle NPLs, as those of the developers climbed to 21.3 per cent of its total loans in the second quarter – up from 17.9 per cent in the first quarter.
Gross NPLs at the bank were 6.9 per cent in the second quarter, the highest percentage of its peers.
Aphinant Klewpatinond, president of KKP, noted that to reduce the volatility and reduce NPLs the bank had to add consumer finance and small enterprise finance as new segments after the bank revamped its risk management and set up retail credit management using statistics.
The bank this year also began providing mortgage loans to customers who purchase homes from the bank’s property developer customers, resulting in new loans of around Bt100 million a month.
Aphinant said the bank plans to introduce loans to small enterprises and personal loans next year after completing its risk management adjustment.
He said that small enterprises might pose a risk but several banks offered products to this segment, while loan guarantees from the government is a tool to reduce risk concerns.
Loans to small enterprises is a segment that banks should have, and KKP has entered the segment later than others, he said.
“A credit line of Bt2 million to Bt3 million is suitable for tapping small enterprises,” he said.
The bank currently offers personal loans to its hire-purchase customers, and personal loans should be offered to general customers when the bank thinks the timing is right, he said.
He said the bank did not have a formula for balancing its loan portfolio when it adds a new loan segment, but over the next three to five years the hire-purchase segment, which makes up 67 per cent of the bank’s total loan portfolio, might go down to below 50 per cent.
Building a new segment around the new customer base will result in higher quality assets, he said.
In the first half of this year, KKP had corporate loans of Bt10 billion but outstanding loans of Bt5 billion because many customers repaid their debt before the due date.
This year, KKP plans to grant new loans of about Bt20 billion to corporate customers. KKP also plans to build its corporate segment loan portfolio to Bt50 billion in the next three to five years.
Aphinant said the hire-purchase segment has “bottomed-out”, especially for used cars, while many SME property developers are expected to start projects in the second half of year.
“Hence, the prospects of lending in the second half will turn to positive growth from negative growth in the first half.
“The bank hopes that its lending this year will meet the flat growth [target] and NPLs should stay at 6 per cent or lower than 6 per cent,” he said.
Based on the expected flat growth, KKP expects its total loan portfolio will be Bt180 billion this year.
