Sukhumvit Asset Management (SAM) Co wants to join with banks to set up a joint venture asset management company (AMC) to buy non-performing loans (NPLs) in the banking industry.
SAM, the country's second largest AMC, has been in talks with both commercial banks and specialised financial institutions about a possible partnership to establish a joint venture AMC to manage bad debts in the banking sector, in line with the rising NPL trend.
Distressed debts are expected to increase significantly in 2023 after the Bank of Thailand's debt restructuring measures expire at the end of 2022, said SAM president Tharatporn Techakitkachorn.
The central bank has been considering relaxing AMC regulations to ease the operation of the business in preparation for NPL management. The easing of rules is expected to be completed in the first quarter of next year.
Presently, special mention loans stand at 500-600 billion baht and around 100 billion baht of these are expected to be classified as NPLs in 2023.
Given this scenario, SAM is prepared to purchase the bad debts and is restructuring its organisation in all areas, especially staff, processes and IT system as well as remodelling its business operation, Mr Tharatporn said.
Normally, the sale of NPLs in the banking sector is around 100 billion baht per year and SAM will buy 10% of bad debts or 10 billion baht.
In 2021, however, the sale of NPLs from the banking sector is lower than predicted. Previously, the company put NPL sales from the banking sector at 90 billion baht this year, but the actual amount is only 60 billion baht.
The lower figure is partly due to the central bank's debt restructuring measures and the banks' strategies to deal with their bad debt.
Given the Covid-19 outbreak, NPLs of the banking sector will continue to rise, largely contributed from small and medium-sized enterprises (SMEs) and unsecured loans.
"This scenario opens more opportunities for AMC business, while banks are interested in setting up a joint venture AMC to manage and make profit from the business," he said.
There are around 50 AMC players, and an AMC sets a unique strategy on the business operation focusing on loan products. However, SAM is keeping its existing policy on bad debt management by focusing on secured loans, particularly SME loans, to help the banking system manage distressed debts.