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SME Bank lowers NPLs in Q1, expects more success

Apr 21. 2016
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THE SMALL and Medium Enterprise Development Bank of Thailand is confident in can work down its non-performing loans to Bt18 billion this year after succeeding in hitting the first-quarter milepost.

SME Bank ended last year with NPLs of Bt23.45 billion, representing 27.2 per cent of its loan portfolio.

Under its business plan presented to the State Enterprise Policy Office, it has to bring NPLs down to Bt18 billion by this year-end.

Salinee Wangtal, chairwomen of the state-run bank, said it had two ways to lower NPLs.

It will sell to asset-management companies this year bad debt worth Bt2.5 billion from borrowers that are no longer in business and whose owners do not cooperate with the bank.

Already Bt1 billion was sold to Bangkok Commercial Asset Management Company in the first quarter. That helped the bank reduce NPLs to Bt21.07 billion, better than the target of Bt22 billion for the quarter.

Gross NPLs in the first quarter improved to 23.8 per cent of outstanding loans of Bt88 billion.

The bank has also set up a loan-monitoring unit at its branches to track the debt-servicing ability of borrowers.

If borrowers are incapable of meeting their instalments, the unit will offer help, such as payment rescheduling or debt restructuring. This will help prevent normal debt from being classified as special mention loans.

The bank is also upbeat about hitting its new loan target of Bt35 billion this year after lending Bt9.96 billion to 3,405 businesses in the first quarter.

That led to a net profit of Bt537 million in the quarter.

The consecutive net profit will help the bank to be removed from the State Enterprises Policy Commission’s list of loss-making businesses in the near future.

“To exit from the list, we have to achieve our missions each year.

“Besides the new loan booking of Bt35 billion and the NPL reduction, the bank’s execution will have to comply with the Bank of Thailand,” Salinee said.

Mongkol Leelatham, president of SME Bank, said it had already executed what the central bank required. The BOT will examine SME Bank’s efforts in July. The bank has executed six requirements – a work manual on lending for credit staff at branches, a work manual on debt resolution, corporate governance, risk asset management, due diligence, and the Basel II capital ratio.

SME Bank has a capital ratio of 14.34 per cent, higher than the guideline of 8.5 per cent under Basel II. However, the central bank requires specialised financial institutions to have a minimum capital ratio of 9.5 per cent.

Mongkol said profit this year would not increase much from last year because the bank will allocate 30 per cent of profit to help developing SMEs through the venture capital fund and lending to social enterprises.

The bank will launch its own lending scheme with a special interest rate next month, as the Bt15-billion policy-loan project with a rate of 4 per cent is expiring this year.

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