KKP forecasts demand for debt assistance likely to skyrocket
Kiatnakin Phatra Financial Group (KKP), a holding company of Kiatnakin Bank, expects a large number of customers to request financial assistance due to the prolonged pandemic.
The number of bank customers requesting debt aid measures has risen to more than 10,000 per day after a significant increase in new Covid-19 infections.
The average number of customers seeking assistance increased from around 400-500 per day prior to the third wave to more than 1,000 once the third wave of the pandemic was surging, said Aphinant Klewpatinond, chief executive of KKP.
Mr Aphinant said the higher level of infections and prolonged outbreak is affecting the ability of customers to repay debt.
A large number of clients who applied for debt aid measures during the first wave of the outbreak have already exited the programme, he said.
Roughly 10-11% of total outstanding loans are under the debt restructuring scheme, down from 40% last year.
The bank is focused on helping customers through longer-term debt restructuring rather than offering short-term packages to sustain their ability to make debt payments, said Mr Aphinant. This allows preparation for when the pandemic ends, he said.
Given higher downside risk to the economy because of increasing infections and delays to the vaccination rollout, KKP expects its non-performing loan (NPL) ratio will increase to a maximum of 4% at the end of this year after reaching 3.4% in June, up from 3.2% at the end of March.
However, the bank upgraded its loan growth target for 2021 to 8-12% from its original target of 5% after booking a 6.6% gain in the first half, compared with the end of last year. The growth was mostly generated by retail and corporate banking business.
As of June, the bank's retail loan growth stood at 9.5% compared with the end of last year, mainly driven by a 16.3% increase in mortgages and a 9.4% gain in auto loans.
KKP booked corporate loan growth of 11.7%.
The bank recorded a net profit of 2.81 billion baht in the first half this year, up 5.6% year-on-year, supported by higher interest income from banking business and fee-based income from the capital market business. The bank recorded an NPL coverage ratio of 160% and a capital adequacy ratio of 17.9%.
Pipat Luengnaruemitchai, chief economist at KKP Research, said delays in the vaccination rollout and the inability to secure sufficient supplies meant only 5% of the country's total population is fully vaccinated. He said 35% of the population are projected to have received two doses of a vaccine by year-end, with lockdown measures estimated to continue for at least another three months.
The research house predicts for a base-case scenario, GDP growth in 2021 of 0.5%. The worst-case scenario, in which the pandemic worsens and stricter measures affect manufacturing activities across the country, the economy could shrink by 0.8%.