State-owned GH Bank aims to lower its non-performing loans (NPLs) from 8.34% to 5% of its outstanding loans, mainly through debt restructuring and selling bad loans.
Even though the property market has not entered a bubble, the bank aims to cut its bad loans to strengthen its balance sheet in the long run.
Its loan criteria are less stringent than those of commercial banks to serve low-income customers.
GH Bank expect to see its NPLs fall to 6.35% by the end of this year, president Angkana Pilun-Owad Chaimanat said yesterday.
Its NPLs rose to 8.34% at the end of June from 7.71% at the end of last year after the bank adopted the Bank of Thailand's classification of bad loans, which is tougher than that of the Finance Ministry.
For example, if a debtor with an NPL returns to pay the debt for three consecutive months, the ministry classifies the loan as performing, while the Bank of Thailand classifies such loans as performing loans only when debtors pay off overdue interest.
At the end of June, GH Bank had total loans of 721 billion baht, up 2.13% from the end of December.
Ms Angkana said the bank aims to extend loans of 120 billion baht this year. In the first six months, it extended loans of 57.6 billion baht and recorded a net profit of 3.71 billion baht.
GH Bank offers low-rate loans for housing repairs and renovation to homeowners free from mortgage obligations.
Customers can borrow up to 300,000 baht for a 10-year loan. The bank charges 3.5% interest for the first two years, 4% for the third year and 1.5% minus the bank's minimum lending rate for the remaining term.
Samma Kitsin, director-general of the Real Estate Information Center, said there is no sign of a bubble in the property market, but there is oversupply in some areas, particularly the Northeast, where land prices have surged by 20-30%.