GH Bank has high-income earners in sight

GH Bank has high-income earners in sight

GH Bank president Chatchai Sirilai
GH Bank president Chatchai Sirilai

The head of GH Bank wants it to lend to high-income earners, putting it on a level playing field with commercial banks and broadening borrowers' alternatives.

The bank's main mission will remain providing mortgages to low-income earners, but it can also penetrate the high-income market, president Chatchai Sirilai said in an exclusive interview with the Bangkok Post.

"Competing for all quality customers is our right. We deserve to eat some big fish, not only gourami. The rationale behind GH Bank's establishment 66 years ago was extending home loans to low-income earners, but we will become smaller and weaker if we are restricted to only this mission," he said.

"Allowing us to catch snakeheads and catfish will not affect small borrowers as we can open another lane [for the new task]. Specialised financial institutions do not have an advantage over commercial banks as they are liable for corporate income tax, while we must make contributions to the government."

GH Bank is the country's largest mortgage lender with loans outstanding of 1.3 trillion baht. Home loan borrowers with up to 2 million baht in debt make up the lion's share of the bank's customers, and its highest loan is worth 7-8 million baht.

Mr Chatchai said GH Bank is set to alter its working process to enable the bank to shorten the loan approval period to overnight from 30 days. This should help the bank be more competitive in vying with commercial banks.

This new process can indicate the working efficiency of each employee, he said.

GH Bank's non-performing loans (NPLs) edged higher to 4.68% of loans outstanding from 4.2% at the end of last year, in line with the increase for commercial banks.

GH Bank's NPLs rose at the same pace as commercial banks', indicating the former has better management because its customers have less money on average, said Mr Chatchai.

To bring down the NPL ratio, the bank plans to divest NPLs worth 10 billion baht next year.

Savings certificate launch

The bank has just completed selling its first savings lottery, with a price of 1 million baht per ticket, raising 27 billion. The roll-out of savings certificates helps the bank address a funding mismatch as the lottery-linked savings product has a three-year lifespan, while most of its deposits have a maturity of less than one year.

The bank can use all proceeds arising from the savings certificate sales to extend low-rate home loans, in compliance with government policy. The issue is among two topics for which GH Bank plans to seek approval from Finance Minister Uttama Savanayana, he said.

The savings certificates' total costs are 2.3% and the bank can offer a fixed three-year mortgage with interest as low as 2.5% per year without any subsidy from the government, said Mr Chatchai.

If Mr Uttama agrees with the bank's proposal, the loan must have little weight in its profitability evaluation as the 2.5% mortgage carries a thin profit margin.

The savings certificate should help the bank become less dependent on deposits, amounting to 950 billion baht at the moment, he said. Other sources of funding are debt repayment worth 8 billion baht a year and bonds worth 70-80 billion.

The certificates also ease pressure on bank branches to raise funds and allows staff to focus more on lending activities, said Mr Chatchai.

He said GH Bank also plans to seek Mr Uttama's opinion as to whether the government will allow the bank to open a new round of housing loan applications under the 1-million-baht low-cost home scheme, and if so, whether its conditions will be tweaked.

Under the mortgage scheme, the bank has loaned less than 10 billion baht of the 127 billion worth of loans applied for construction of residential units, though some units have not been completed.

LTV measures

The state-owned mortgage lender fell short of its 100-billion-baht target for new housing loans by 10 billion during the first half of this year, attributed to many holiday-shortened months and the impact from the Bank of Thailand's new loan-to-value (LTV) requirements, said Mr Chatchai.

"We earlier forecast a 30% decrease because of LTV measures, but it has only made us dip by 10-15%," he said.

The central bank's stricter mortgage measures are aimed at lowering search-for-yield behaviour, but they have had a spillover effect on GH Bank's customers, though they do not have such behaviour, said Mr Chatchai.

Some of the bank's customers are shelving their plan to buy a second home because they do not have enough money for a down payment, as the LTV measures increase the required amount, he said.

"The central bank's intention is noble, but it doesn't suit the Thai social context, in which the wealth gap is relatively high," said Mr Chatchai.

He suggested the Bank of Thailand apply stringent measures to targeted banks that have provided borrowers multiple mortgages for buy-to-rent or buy-to-sell purposes.

Homebuyers, starting from April 1, are required to make a minimum down payment for third and subsequent mortgages of 30% of the home price, with second mortgages set at 10-20% of the home price, depending on how long a borrower has made payments on the first mortgage.

The LTV ratio of 90-100% remains unchanged for those who apply for a first mortgage to buy a home priced below 10 million baht, but the ratio is lowered to 80% when the borrower buys a residence valued at 10 million baht or higher.

Despite the target shortfall for the six months through June, GH Bank expects its new loan target for this year is reachable, he said.

The bank aims to extend 203 billion baht in mortgages in 2019.

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