Loan decline points to tough times

Loan demand among used-car dealers is expected to drop by 20% this year from 2008 due to weak consumer demand and declines in the overall automobile sector, says Kiatnakin Bank president Tawatchai Sudtikitpisan.

New-car sales are projected to be down at least 20% this year to between 480,000 and 500,000 units compared with 600,000 last year.

Mr Tawatchai said Kiatnakin was continuing to provide finance to used-car dealers and customers in the tough economy. However, the bank has been more cautious in approving loans for dealers, just as it has been for other business sectors amid the downturn.

"We would support routine loans to existing customers rather than expanding our base given our key concentration on asset quality for this year," he said. "The policy is in line with the market environment as there are no new players in the bad situation."

Kiatnakin has between 300 and 400 used car dealers as customers with between 1.2 billion and 1.5 billion baht in outstanding loans. Used cars represent 50% of its total car portfolio worth 60 billion baht.

Mr Tawatchai said the bank was continuing to lend to used-car buyers, where it sees demand rising as drivers seek to save money by forgoing new cars. The bank expects to finance 25,000 used cars this year, higher than its earlier target of 20,000, and has made 7,000 such loans since the beginning of the year.

At Thanachart Bank, senior vice-president Anuchart Deeprasert said loan demand from both used car buyers and dealers had decreased because of the economic downturn. The bank expects its portfolio to reach 4 billion baht in working-capital loans to dealers and 80 billion to individual buyers this year.

However, the bank aims to maintain its total auto leasing loan portfolio at the current 200 billion baht this year.

Asset quality is the key focus for doing business doing in the poor economy, Mr Anuchart said.