GSB enters car title loan business

GSB enters car title loan business

Bank sets up venture with Srisawad Corp

Mr Vitai, centre, and Ms Thida, second from left, promote the Fast Money company that aims to lower the interest rate for car title loans.
Mr Vitai, centre, and Ms Thida, second from left, promote the Fast Money company that aims to lower the interest rate for car title loans.

The Government Savings Bank (GSB) has established a joint venture with a subsidiary of SET-listed Srisawad Corporation Plc for its foray into the car title loan business.

GSB holds a 49% stake in Fast Money Co Ltd, a wholly-owned subsidiary of Srisawad Corporation. The stake is valued at 1.5 billion baht.

The price per share received by GSB is about 15% lower than the fair market value, said GSB chief executive and president Vitai Ratanakorn.

The joint venture aims to expand its customer base by 1 million people during the first year of partnership, with a plan to list the company on the Stock Exchange of Thailand within the next three years, said Mr Vitai.

He said the main objective of GSB's foray into the vehicle title loan business is to help reduce the market interest for this loan segment from 24% to 18% per year.

When the interest rate for car title loans decrease, it is believed this could reduce interest rates applied to other categories of loan products accordingly, said Mr Vitai.

Around 3 million clients use the services of car title loan businesses, while those who have been rejected for loans by financial institutions number around 3.1 million, he said.

"This joint venture will be a boon for existing customers and new customers," said Mr Vitai.

The joint venture is in line with the bank's strategic direction to become a social bank by reducing the interest of car title loans through market forces.

Net interest margin (NIM), a measurement comparing the net interest income a financial firm generates from loan products with the outgoing interest it pays holders of savings accounts and certificates of deposit, for car title loans averages 15-20%.

This rate is much higher than the NIM of state-owned banks and commercial banks, at 2.5% and 3-3.5%, respectively.

The car title loan business is worth 110 billion baht, with non-performing loans (NPLs) logging 2.6% of total outstanding loans, according to data from the National Credit Bureau.

For Fast Money, the NPL ratio stands at 1-2% of total outstanding loans and the amount of car title loans in its portfolio is valued at 8 billion baht.

The company has 500,000 customers and a 10-15% market share.

Last year's profit was registered at 600 million baht.

Thida Kaewbootta, group strategist of Srisawad Corporation, said the joint venture will help expand the company's customer base through GSB's 1,060 branches.

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