Kiatnakin Bank cautious in face of BOT rules tightening
KIATNAKIN Bank Plc has set a modest 8 per cent target growth in loans for this year, down from the 18.5 per cent rise seen in 2018, amid rising worries over the central bank’s new macro-prudential guidelines and rising interest rates.
KKP also expects the level of non-performing loans (NPL) ratio to be lower in 2019 after the NPL ratio stood at 4.1 per cent last year.
“We expect the NPL ratio for this year to be no higher than 4 per cent,” Aphinant Klewpatinond, CEO of Kiatnakin Phatra Financial Group yesterday told a press conference.
The falling level of NPL could be attributed to an improvement in the bank’s management of problematic loans, especially in the real estate sector, he said.
“In the past year, real estate (RD) loans grew at a significant rate despite various real estate experts warning of slower growth in the sector,” he claimed.
KKP’s commercial lending grew by 26 per cent in 2018, with the real-estate lending component growing by up to 36.6 per cent, said Preecha Techarungchaikul, the bank’s head of financial markets group and acting head of finance and budgeting group. In private banking, KKP will continue to offer a diverse range of investment products through its many structured notes or national investment funds, such as the Thailand Future Fund.
The bank currently has Bt650 billion worth of assets under advice, and aims to achieve Bt1 trillion. However, the bank’s CEO hinted that this aim may not be attainable by the end of 2019 given the upcoming challenges in the market.
The Bank of Thailand’s new macro-prudential guidelines announced back in October last year could have negative impacts on the number of real-estate loans this year, Aphinant cautioned.
Under the new rules, the maximum loan-to-value (LTV) ratio will be restricted to 80 per cent on new mortgages for homes worth more than Bt10 million. The same LTV restrictions will apply for the purchase of a second home, irrespective of the property value. Banks will also be prohibited from providing advances that exceed the value of a property.
“The macro-prudential may have further impacts beyond the real-estate loans and also dampen the level of other loans,” he said.
When questioned whether KKP’s real-estate loans will shrink this year as a result of the Bank of Thailand (BOT)’s new home-loan rules, Aphinant replied that he expects KKP’s real-estate lending to grow at a slower pace, but believes the loans will not contract.
Another risk factor is the prospect of rising interest rates.
“We believe the BOT will increase the policy rate once this year by 0.25 points, increasing the interest rate from 1.75 to 2 per cent,” said Pipat Luengnaruemitchai, assistant managing director, head of private wealth management research of Phatra Securities Pcl.
“The BOT is expected to value financial stability and the creation of policy space to stimulate the economy in the future over the actual economic situation,” he said. “Hence, despite dimmer economic outlooks such as slower GDP and exports growth, as well as lower inflation, we expect the BOT to still hike rates once in the middle of this year.”
Phatra Securities forecasted the nation’s GDP would grow by 3.7 per cent in 2019, down from last year’s 4.3 per cent, exports would grow by 3.9 per cent, down from last year’s 7.6 per cent, and inflation would remain at a low 0.9 per cent. However, KKP is yet to have any plans to increase interest rates for its clients, said Aphinant.
The bank’s loan spread stood at 5 per cent in 2018 and is expected to fall to a range of 4.5 to 4.7 per cent this year.
