Center Auto Lease raises new-loan target after adjusting risk management
WHILE THE decline in new car purchases has led several lenders to cut their growth forecasts, Center Auto Lease (CAL), a wholly owned subsidiary of CIMB Thai Bank, is raising its new-loan target after adjusting risk management and collaborating with the U
Visit Phuengpornswan, managing director of CAL, said the company was now targeting between Bt6.5 billion and Bt7 billion in new loans this year, up from the previous target of Bt5.3 billion, after lending Bt2.7 billion in the first half. Based on the new target, the loan portfolio by the end of this year is expected to reach Bt17 billion.
In the first half, CAL enjoyed a profit of Bt122 million, a turnaround from the loss of Bt51 million in the same period last year.
Unlike other lenders that focus on new cars, CAL’s major portfolio is used vehicles, so the company quickly adjusted its risk management when it saw used-car prices begin to decline in the first half of last year.
The company began cooperating with the Used Car Association, which helps members find quality customers who can keep up with their payments. This has allowed CAL to extend larger loans to its customers, for example Bt300,000 when previously it would not risk lending more than Bt200,000.
About 90 per cent of CAL’s loan portfolio of Bt16.5 billion is used cars, so the company is familiar with this segment. It would like to increase its new-car portfolio, but this is not easy under the current situation. The cost of funds is a factor behind the decision to limit its lending for new vehicles and concentrating on used cars and trucks instead.
The company also plans to raise the proportion of its lending for truck purchases to 10 per cent next year from 5 per cent this year.
Demand tipped to rise next year
Demand for commercial vehicles and small company trucks is expected to increase after the Asean Economic Community becomes fully effective, and yield from lending in this segment is 8-12 per cent, higher than for used passenger cars and pickups, Visit said.
Before CAL adjusted its risk management, its customers were largely self-employed people or those in the agricultural sector, and the risk of bad debts was high because the main business channel was small used-car tents and other small dealers.
Now, however, salaried people make up 50 per cent of new borrowers, up from 20 per cent before the adjustment, Visit said.
“Around 60 per cent of our customers are recorded at the National Credit Bureau. As well, we have used an outsource company to collect non-performing loans, so our NPL rate has improved to 2.88 per cent from 4 per cent last year,” he said.
The company will try to improve its NPL rate this year to 2.6 per cent.
The company has a refinancing product called Center Auto Cash, for which CIMBT branches are the main channels to acquire customers.
Visit said the CAL brand might not be sufficiently well known, so it plans to discuss with the parent company the possibility of establishing a new brand that might include “CIMB” in order to increase the confidence of customers.
In terms of brand awareness, CAL wants to be in the top 10 next year, he said.
