KTB slams the brakes on auto loans

KTB slams the brakes on auto loans

KTB Leasing will extend no further car loans this year. (Photo by Patipat Janthong)
KTB Leasing will extend no further car loans this year. (Photo by Patipat Janthong)

Krungthai Bank (KTB) is halting its auto loan expansion amid heightened competition, saying the business is uncompetitive against rivals.

The bank does not expect to let its subsidiary KTB Leasing Co acquire new customers or extend additional auto loans this year because of a host of negative factors, said president Payong Srivanich.

Apart from weaker competitiveness, the country's cooling economy is hampering consumer purchasing power, he said.

KTB Leasing will continue to take care of its current auto loan customers, who have loans outstanding of 11 billion baht, Mr Payong said.

"Amid several uncertainties, this isn't a suitable time to expand auto loans," he said. "The bank cannot give a specific time frame for when it will resume auto loans, but we do not plan to stop the business permanently, nor sell off assets."

The central bank is wary of auto loans after double-digit growth in lending and an uptick in bad loans.

The non-performing loan (NPL) ratio for automobiles increased to 1.71% at the end of March from 1.66% at the end of last year, while special mention loans -- loans overdue by more than one month but less than three months -- stayed elevated at 6.90% at the end of March, down from 7.11% in 2018.

Mr Payong said auto lending will remain the bank's core business and it has the potential to grow on the heels of healthy new-car sales, but for now KTB will spend more time restructuring internal operations and wait for the right time to resume the business.

Auto loans via the digital platform could lead to sustainable growth in the long run, in line with changing consumer behaviour, he said.

The bank is mulling several business models, including partnerships, so it needs to conduct an in-depth study of the overall factors to set a clear direction and sharpen competitiveness, Mr Payong said.

KTB continues to see growth in its mortgage lending this year, he said, despite the central bank's new loan-to-value restrictions that took effect on April 1.

For the first three months of this year, the bank's housing loan portfolio rose 1.1% from the end of last year to 381 billion baht.

Retail loans account for the largest portion of the bank's lending portfolio at 789 billion baht or 40.3% of KTB's loans outstanding, mainly driven by mortgages and personal loans. Most of the loans were extended to civil servants.

KTB shares closed Friday on the Stock Exchange of Thailand at 19.10 baht, up 10 satang, in trade worth 321 million baht.

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