Demand for SME loans is falling in the wake of escalating political tensions and the economic slowdown, says a senior Kasikornbank executive.
Of KBank's loans outstanding to small and medium-sized enterprises (SMEs) of 516.17 billion baht, around a quarter has been shaved off as existing borrowers have repaid debts, while none of those receiving a credit line have drawn down loans, said executive vice-president Patchara Samalapa.
Sluggish loan demand has been mostly seen among medium-sized businesses with strong financial positions.
The country's economic growth is losing momentum after the impact from the government's first-time car-buyer scheme has worn off and household debt has ballooned.
The ongoing political impasse further weakened economic growth as it crippled demand and delayed the government's hefty investment plans.
But cooling SME loan demand has not had any impact on the bank's SME lending growth target this year since the 10% goal was already reached in September.
Net profit growth of 21% for its SME loans already surpasses its 14% growth target.
"But 2014 will be a challenge. We set SME business net profit growth at 13%, an ambitious level given the risky environment," he said.
KBank, the country's fourth-largest bank by assets and the largest SME lender, set a SME loan growth target of 9-11% for next year.
Taking good care of existing customers and seeking new clients in provincial markets are the key drivers for the expansion.
Thailand's total registered SME businesses number 2.6 million, 28% of which have no access to official financial sources.
The bank will refine its focus to SME exporters in certain sectors, especially auto parts, electronics, agriculture and processed agriculture. Recently, it slowed extending export-related loans in line with the weak global economy.
The bank also plans to pay more attention to China-linked exports and imports. Border trade is another key focus area ahead of the imminent Asean Economic Community (AEC) slated for the end of 2015.
Despite a riskier setting next year, the bank aims to reduce SME non-performing loans (NPLs) to 2.55% of loans outstanding from 3.05% this year. Strong risk management and a larger loan portfolio will help to lower the SME bad loan ratio.
Mr Patchara said mid-sized businesses carry a higher risk than small customers next year as they have already secured a large amount of loans this year for fixed-asset investment and building up inventory, which takes more time to turn into income.
KBank's shares rose one baht to close yesterday on the SET at 167 baht in trade of 1.39 billion baht.