K-Research: AMC numbers climbing
The number of asset management companies (AMCs) in Thailand has increased significantly over the past eight years, representing hopes to capitalise on business opportunities amid higher bad-asset divestment by financial institutions, according to Kasikorn Research Center.
AMCs incorporated in the past eight years have focused on different types of bad loans, said Thanyalak Vacharachaisurapol, K-Research's deputy managing director.
"They see business opportunity and a chance to profit from managing bad assets, even those without collateral," she said. "Higher AMC numbers also reflect the rising NPLs [non-performing loans] and swelling household debt."
According to Bank of Thailand data, AMC numbers rose to 58 at the end of October from 55 at the end of 2018 and 20 as of January 2011.
Yet net foreclosed properties totalled 40.9 billion baht at the end of October, compared with 39.1 billion baht at the end of last year and 8.06 billion baht at the end of January 2011.
Total AMC assets kept rising from 186 billion baht in January 2011 to 204 billion baht at the end of 2018 and 214 billion baht as of October this year.
Ms Thanyalak said bad-debt write-offs and disposal were the means for the banking sector to keep a lid on NPLs in recent years.
Apart from economic circumstances, regulations are another key factor encouraging banks to sell bad assets to AMCs to control operating costs, even by offering discounts of more than 50% to sell some troubled assets.
K-Research forecasts the average credit cost for the banking industry to increase marginally to 120% next year from 110% in 2019. Given the strong buffer of a coverage ratio at 140-150%, the industry will not need to dramatically build up provisions for credit losses next year.
Somporn Moonsrikaew, president of Bangkok Commercial Asset Management (BAM), said the new players in the business are mostly small AMCs, some established with specific purposes, while others evolved from law firms with expertise in debt collection because they saw opportunities in bad-asset management.
Some of them are setting up to support existing unsecured loans in order to collect their owned bad debts when NPLs increase significantly, then close them after debt collection is completed.
"The rising NPL and bad-asset sales over the past 10 years present business opportunities," Mr Somporn said.
The financial sector's outstanding NPLs amounted to 200 billion baht 10 years ago and more than doubled to above 400 billion baht.
BAM, the country's largest AMC, mainly focuses on buying secured loans from financial institutions for bad-debt management.
KBank co-president Kattiya Indaravijaya said the bank's strategy next year is to manage bad assets rather than sell AMCs in anticipation of better returns in the longer term.
The bank's NPLs are expected to continue to climb higher next year amid several economic uncertainties worldwide, forecasting higher credit cost of 150% in 2020.