Banks clamp down on loan approvals

Bubble concerns spark risk management push

Commercial banks have tightened loan approvals for property and equity markets following mounting concerns over an asset price bubble.

Siam Commercial Bank maintains tough risk management on loan analysis to the property sector both pre- and post-finance services.

Thailand's third-largest lender by assets has focused on extending loans to a handful of the country's top property developers who have a combined market share of 60-70%, and most of them are listed on the Stock Exchange of Thailand.

Bank of Thailand governor Prasarn Trairatvorakul said yesterday that the central bank has repeatedly instructed commercial banks to maintain their mortgage loan standards and shun the competition as property prices in some areas will continue to rise.

SCB chairman Vichit Suraphongchai said the leading property developers have survived the country's property bubble burst and financial crisis in 1997 and their strength will protect the financial market.

"Despite no signs of a property bubble compared to the 1997 crisis, we are closely monitoring the situation amid market concerns and warnings from the central bank," he said.

SCB, the country's largest mortgage loan provider with a loan portfolio of more than 400 billion baht, has cancelled zero-rate mortgage loans offered to the public to prevent speculation amid the booming property market. However, the bank still offers zero-rate mortgage loans to selected projects.

The Bank of Thailand recently requested commercial banks clarify the interest burden on its zero-interest mortgage campaigns to customers.

As a leading consumer finance bank, SCB will extend loans to all qualified customers including those who borrow under the government's populist programmes such as the first-time car buyer scheme. Lending to selected car buyers and dealers is instrumental to maintaining good asset quality, Dr Vichit said.

He added that the bank has no policy to allow its subsidiary, SCB Securities, to extend margin loans aggressively, despite bullish market conditions, because there are signs of speculation in the stock market.

CIMB Thai Bank has also become more prudent about extending mortgage loans.

Despite a 10% growth in its mortgage loan portfolio so far this year, this is considered the normal rate for smaller banks with outstanding mortgage loans of 30 billion and a mere 1-2% market share, said CIMB Thai Bank executive vice president Adisorn Sermchaiwong.

Kasikornbank has put the brakes on extending loans to some risky assets, such as unsecured loans amid rising household debts and signs of speculation in property and stock prices.

KBank chief executive officer Banthoon Lamsam said such practices would be compatible with long-term asset quality. The bank's total loan growth target of 10% this year is in line with the country's economic growth and is good risk management practice, he added.

About the author

Writer: Somruedi Banchongduang
Position: Business Reporter