SCB to concentrate more on lending for purchases of used cars

The bank’s outstanding instalment loans amount to Bt169 billion, and it expects that figure to be about the same by the end of this year.

However, the structure of auto lending will be changed because the market is shifting to used cars and car-title loans, as the higher prices of new vehicles amid an economic slowdown are discouraging people to look for new cars.

In the first quarter of this year, SCB lent a total of Bt18 billion for new car purchases. Even though new-auto loans still make up the major proportion of its portfolio, its car-title-loan product called My Car My Cash climbed to 17 per cent of the total, from 16 per cent in the fourth quarter of last year. That fourth-quarter ratio was up from 14 per cent in the first quarter of 2015.

It is possible that the proportion of new-car loans will fall to 50 per cent of the portfolio by the end of this year because of the upward trend of used-car and car-title loans. Narong said that even though these types of loans could pose higher risk than new-car loans, the tightening in credit approval at SCB had lessened the chance of new non-performing loans from the two products.

Gross NPLs from SCB instalment lending as of the first quarter dropped to 1.9 per cent from 2.1 per cent in the previous quarter, while new NPLs in the first quarter were only 0.41 per cent against 0.56 per cent in the fourth quarter and 0.70 in the first quarter of 2015.

With efficient risk management and the high yields of used-car and car-title loans, the bank will be able to put emphasis on both segments, which will help it book new loans totalling Bt70 billion throughout the year. If that new-lending target is met, its outstanding loans will not drop, Narong said. “The bank will control gross hire-purchase NPLs at 2.1 per cent. During the economic slowdown, there is a chance of rising NPLs. But if these are offset by high returns, it is worthwhile for the bank to move strongly into these segments,” he said.

Returns from hire-purchase business surged to 6.28 per cent in the first quarter against 6.01 per cent a year earlier.

Narong said the income from instalment lending was projected to expand by 20 per cent this year, while fee income from selling insurance to borrowers will help drive profit.

Asked if the interest rates for hire-purchase loans should be lowered, he said the current rate for new-car loans was already low. However, the rates for used-car loans might be lowered because of the rebound of serious competition in this segment.