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LH Bank allows struggling borrowers to adjust mortgage instalments

Jul 28. 2016
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LAND AND HOUSES Bank has seen a rising number of customers who are unable to make their mortgage instalments, so it is allowing them to adjust their payments to amounts they can afford.

Sutharntip Phisitbuntoon, senior executive vice president for LH Bank’s credit sector, said yesterday that about 10-15 customers a month requested this solution.

She raised the example of a customer who used to pay a monthly instalment of Bt10,000, but now that customer could only afford Bt7,000-Bt8,000. The bank allows the customer to pay that amount for three years until he or she is once again able to pay the previous amount.

The bank can maintain a non-performing-loan rate of 1.7-1.8 per cent of its Bt32-billion housing-loan portfolio.

One reason for the rising number of customers unable to pay the mortgage instalments originally agreed to may be a reduction in the number of customers who have purchased homes from two affiliated companies, Quality Houses (QH) and Land and Houses (LH).

In the past, about 70-80 per cent of the company’s housing-loan portfolio consisted of buyers from QH and LH, but now they account for only 40 per cent.

To expand its customer base, LH Bank hired commission-based staff to lure home-buyers of housing projects other than those of QH and LH. It is possible that the quality of those customers was not the same as buyers from QH and LH, Sutharntip said.

She added that the mortgage-approval rate had dropped to 32 per cent from 40 per cent at the end of last year because customers have less purchasing power.

LH Bank receives about 800 new housing-loan applications per month.

The bank this year targets housing-loan growth of 5 per cent but given the situation in the housing market and price competition, it might not achieve the target, Sutharntip said.

In the first half, LH Bank reported housing-loan growth of 0.7 per cent, while overall lending by the bank grew by 6 per cent.

LH Bank offers a 4-per-cent-per-annum fixed rate for the first three years of a mortgage, but will offer 3.75 per cent to some customers on a case-by-case basis.

The housing market is heavily supplied right now, so the bank has seen a slowdown in pre-financing to developers because the projects that the bank supported earlier have witnessed a slowdown in sales.

Housing loans represents 20 per cent of LH Bank’s total loan portfolio of Bt158 billion.

Sasitorn Phongsathorn, president of the bank, said it had not changed its loan-growth target of 10-12 per cent, as corporate loans remained its focus. Corporate loans account for 39 per cent of the total.

Even though lending to big corporates has a narrow margin, the bank will try to manage funding costs by seeking current and savings deposits.

She said the bank had to sustain lending growth together with the profit from investments to maintain return on equity after Taiwan-based CTBC Bank becomes a shareholder of LH Financial Group, the parent company of LH Bank.

LH Bank hopes the deal will be completed this quarter, but that depends on the regulators in Thailand and Taiwan, she added.

LH Financial Group will receive Bt16.6 billion from the sale of new shares to the Taiwanese bank, bringing LH Bank’s Tier 1 capital adequacy ratio to 21.3 per cent, up from 10.2 per cent now.

CTBC Bank will hold 35.6 per cent in LH Financial Group, the same shareholding proportion as the existing major shareholders LH and QH. After the transaction, the combined holding of LH and QH will be diluted to 35.6 per cent, of which 21.9 per cent is held by LH and 13.7 per cent by QH.

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