Tisco Bank vies for position in fierce mortgage market
Tisco Bank, which is set to become a mortgage player after completing an acquisition deal with Standard Chartered Bank Thai (SCBT), is confident of its competitive edge despite the challenges of the minimum retail rate (MRR) cuts by the four big lenders.
Although Tisco Bank is new to the housing loan market, president Sakchai Peechapat said the quality of its customer base, unique product features and pricing will help it expand its business in the long run.
Late last year, Tisco Bank and its sister firm All-Ways Co announced the acquisition of the retail banking business of SCBT for 5.5 billion baht.
Under the deal, Tisco Bank acquired SCBT's credit cards, personal loans, business loans, wealth management unit, mortgage loans, bancassurance and retail deposits.
Some 7 billion baht in personal loans, 5 billion in business loans, 25 billion in mortgages, six branches of SCBT, 300,000 retail customers and another 100,000 affluent clients will be transferred to Tisco Bank, while a credit card business valued at 4 billion will be shifted to All-Ways.
SCBT will also help to manage the business for one year after the asset transfer is completed by the end of this year.
The recent MRR rate reductions in a range of 12.5-25 basis points by Bangkok Bank, Krungthai Bank, Siam Commercial Bank, Kasikornbank and Government Savings Bank have heated up competition in housing loans. MRR is the prime lending rate on which mortgage rates are based.
Mr Sakchai said SCBT's current housing loan rate is competitive and its asset quality is pretty good as shown by its loan-to-value (LTV) ratio, a lending risk assessment which indicates the ratio of a loan to the value of an asset purchased. He said Tisco Bank's LTV ratio is lower than the industry range of 90-120%.
Typically, a loan with a lower LTV ratio is less of a risk for the lender and recipient, since less is being borrowed.
Upper-market salary workers, both in terms of education and income, are the key mortgage clients of SCBT, said Mr Sakchai, adding that the high asset quality and lower rate of non-performing loans can help the bank save in terms of loan loss provisions.
"Costs saved from both provisions and funding are key factors to helping maintain profitability of the bank's mortgage business amid the greater challenges," he said.
Moreover, SCBT's MortgageOne allows homebuyers to roll their savings, deposit and current accounts, along with their home loans, into one account, with deposits made reducing the mortgage principal, resulting in a lower interest rate.
Borrowers are permitted to repay up to 50% of the remaining principal on their home loans without any penalty. He said the bank will focus on internal operations rather than loan growth for the first three to six months after the assets are transferred.
In another development, Tisco Bank has joined with 10 asset management companies to offer an open architecture mutual fund service to wealth customers. The move is intended to expand the bank's wealth management business in preparation for SCBT's asset transfer.
The bank is set to strike deals with the first four asset management companies this year and six other firms in June.