The number of small and medium-sized enterprises (SMEs) requesting grace periods for principal loan repayments is rising as they face a liquidity crunch amid the stuttering economy, says Kasikornbank (KBank).
Visitors seek advice on business start-ups yesterday at Kasikornbank’s booth at the Post Today K SME Expo 2014, held yesterday at the Bangkok Convention Center at CentralPlaza Lardprao. PHRAKRIT JUNTAWONG
Executive vice-president Patchara Samalapa said more borrowers are asking for a grace period after struggling through months of political upheaval that have taken a toll on the already lacklustre economy.
KBank, the country's largest SME lender, had already offered a maximum six-month grace period for SME principal loans worth a combined 9 billion baht for the first quarter this year.
Farming and related businesses, hotels, property and export-oriented furniture are the sectors most vulnerable to the fragile economy.
The grace period is KBank's measure to help relieve SMEs' burden amid the economic uncertainty and maintain its distressed loans at a satisfactory level of about 3% of outstanding SME loans.
Fitch Ratings earlier this year warned the protracted political turmoil could weigh on Thai banks' resilience.
The weakening of activity since the onset of anti-government protests late last October is raising the likelihood of pressure on banks' asset quality.
The financial system’s vulnerabilities have risen, as it is now more highly leveraged than ever before, while the household sector’s indebtedness in particular rose sharply to 80% of gross domestic product at the end of last year's third quarter from 60% at the end of 2009.
These trends have heightened credit sensitivities to a downturn and are largely reflected in Fitch’s negative outlook on the overall sector this year.
The delay in payment to farmers under the controversial rice-pledging scheme is another factor that is drying up liquidity of farming and related businesses, particularly merchants of fertiliser, insecticide and seeds.
The 9-billion-baht grace period for SME borrowers is regarded as a small portion of KBank’s SME loan portfolio of 530 billion baht.
The country's fourth-largest lender intends to expand its SME loans outstanding to 560 billion baht this year even though it recorded only marginal growth in the first quarter.
In the first three months, KBank recorded SME loan growth of about 1% quarter-on-quarter and 11% year-on-year.
SME loan business contributed 9.6 billion baht in revenue for the first quarter, up by 16% from the same period last year.
KBank has revised down its 2014 SME loan growth target to 6-8% even though demand for loans has improved since last month after 65 billion baht in new loans were extended after sluggish loan demand in the first two months.
Mr Patchara expects seasonal factors will help to boost SME loan demand in the second half of this year, particularly from the agricultural sector in provincial areas.
Shares of KBANK closed yesterday on the Stock Exchange of Thailand at 196.50 baht, up 2.50 baht, in heavy trade worth 1.72 billion baht.