KTC raises loan-loss buffer as 2020 looms
Krungthai Card (KTC), an unsecured loan provider under Krungthai Bank, is poised to set aside higher loan-loss provisions next year as the economy will likely remain sluggish, a new financial reporting standard is implemented and business expands.
The company has prioritised asset quality while economic gloom abound, said chief finance officer Chutidej Chayuti.
KTC's ratio of allowance for doubtful debts to non-performing loans (NPL) rose to 641% at the end of September from 615% over the same period last year. The increase in provisions was in line with higher bad-loan write-offs, allowing the company to control its bad loan ratio at 1.1%.
He said KTC plans to maintain its doubtful allowance ratio at a high level next year and has no policy to move the provisions back into profits.
The planned additional reserves are also needed to comply with the new Thai financial reporting standard 9 (TFRS 9), which will be adopted early next year.
Amid a spate of uncertainties, the company's profitability will be under pressure next year, said Mr Chutidej.
The company is worried that economy next year will expand at a slower pace than this year, dampened by the global economic slowdown and this will deteriorate borrowers' debt-servicing ability, he said.
Debt collection is also expected to be more difficult in this environment.
KTC has been exploring new business opportunities in several areas, including title loans for cars and motorcycles, nano-finance and pico-finance.
Pico-finance services will be piloted this month and will cover both secured and unsecured loans.
KTC's pilot project for car and motorcycle title loans has started and additional provisions are required to cushion against risks for new businesses, said Mr Chutidej.
"Typically, unsecured pico-finance loans carry high risks. We don't know exactly how much we will need for doubtful allowances next year. We need to test several business models for pilot projects to find the right one," he said.
Mr Chutidej said the Bank of Thailand's new market conduct rules that requires financial institutions to report the phone numbers of both telesales and debt collection to the National Broadcasting and Telecommunications Commission (NBTC) mobile app, Gun Guan, would not affect the company.
KTC adheres to central bank regulations, so there are no concerns consumers will reject telemarketing and debt collection calls, he said.
Gun Guan will allow users to screen unwanted telesales calls.
The company needs to improve overall products and services to draw consumers and prevent them from blocking calls from KTC's telemarketing sales staff, Mr Chutidej said.