Land and Houses Bank (LH Bank) expects its mortgage loans outstanding to shrink by 1.5 billion baht this year as ballooning household debt and the sluggish economy have compelled the bank to tighten its housing loan approval criteria.
LH Bank is still cautious about approving mortgage loans but has loosened criteria in the second half. Thanarak Khunton
The bank saw a slowdown of new mortgages early this year as the pre-coup political crisis battered the economy, said senior executive vice-president for credit sector Sutharntip Phisitbuntoon.
It remains cautious about approving mortgage loans as the economy stutters and household debt is still high, although it loosened criteria in the second half as political uncertainties came to an end.
The bank's mortgage rejection rate is down to 30% of total applications from 40% earlier, while its contraction amount estimated for this year has narrowed to around 1.5 billion baht from 2-3 billion baht earlier.
LH Bank, of which major shareholders are Land and Houses (LH) and Quality Houses (QH), has eased its requirement for loan-to-value ratio to 100 from 95%.
The bank's housing loan portfolio is about 31 billion baht or 27-28% of total outstanding loans at 113 billion baht, while wholesale loans account for the lion's share at 55% and SME loans make up the rest.
Project finance and long-term loans dominate 95% of LH Bank's corporate lending due to their attractive margins and being bad debt-free.
The decline in mortgage lending also matches the bank's policy to focus more on other loans to diversify its portfolio. Moreover, wholesale and SME loans have better margins at around 4.8% and 3%, respectively.
Despite better economic prospects next year, the bank is keeping its guard up against any bad loans by focusing on extending mortgages to SET-listed property developers' projects, Ms Sutharntip said.