Top banks set lower NPL targets for 2022
Uneven economic recovery expected
Four local banks unveiled their financial goals for this year, with all setting lower non-performing loan (NPL) targets in line with the economic recovery, although the rebound is projected to be uneven.
Bank of Ayudhya (BAY), which uses the marketing name Krungsri, Kasikornbank (KBank), Siam Commercial Bank (SCB) and Bangkok Bank (BBL) each recently informed the Stock Exchange of Thailand (SET) of their financial targets for this year.
The four banks set lower gross NPL targets this year compared with targets last year.
This year BBL expects to contain gross NPLs at below 4%, compared with a target of 4.5% last year. Even though it posted strong loan growth last year, BBL controlled gross NPLs at 3.2% in 2021.
KBank projects keeping its gross NPL ratio in the range of 3.7-4% in 2022, compared with 4-4.5% in 2021. The bank booked an NPL ratio of 3.76% of its total portfolio last year.
SCB targets keeping a lid on NPLs at below 4% this year, compared with a projection of 4-4.5% last year. Its NPL ratio for 2021 stood at 3.79%.
Krungsri expects a gross NPL ratio for 2022 of 2.6%, declining from its 2021 projection of 2.7%. It posted an NPL ratio of 2.2% last year.
Despite setting a lower gross NPL ratio target for 2022, KBank set a strong loan growth target for this year in the range of 6-8%, the highest growth rate target among the four banks.
KBank booked loan expansion of 7.88% last year, higher than its projection of 4-6% in 2021.
The strong loan growth target for this year is expected to receive a major contribution from retail loans, projected to gain by 9-11%, followed by growth of 4-6% for small and medium-sized enterprise (SME) loans.
KBank predicts growth of only 1-3% for corporate loans.
Kattiya Indaravijaya, chief executive of KBank, confirmed the bank's loan expansion this year would be mainly contributed by retail and SMEs, backed by its use of data analytics for approvals.
A regional expansion strategy will also support the bank's loan growth in 2022, said Ms Kattiya.
Corporate loan growth this year will depend on demand as the economic recovery is likely to be uneven for several sectors, she said. Corporate clients increasingly applied for loans to bolster their liquidity to cope with uncertainties in 2021, and they are expected to gradually use this funding in 2022 if the impact of the Omicron variant is limited, said Ms Kattiya.
She said banks are prepared to comply with responsible lending criteria, which is scheduled for enforcement in the future. KBank must also ensure customers have sufficient funds in their accounts and the ability to service debt, said Ms Kattiya.
BBL, the country's largest lender by total assets, set its 2022 loan growth target in the range of 4-6%, the same level as 2021. It posted strong loan growth last year of 9.3%.
SCB and Krungsri both set 2022 loan growth targets at the same level as last year -- a range of 3-5%.
For 2021, SCB and Krungsri posted loan growth of 2.1% and 3.1%, respectively.
SCB chief financial officer Manop Sangiambut said the bank will focus on growing fee-based income rather than loan growth this year.
For 2022, SCB set a growth target for non-interest income in the range of 1-5%, compared with a flat rate the previous year.
Three core business areas -- wealth management, bancassurance and return on investment from the bank's tech venture SCB 10X -- are the main fee-based income contributors for SCB.
However, higher uncertainties in the global financial and capital markets because of the expectation the US Federal Reserve will hike its policy rate a number of times this year could impact these three business areas, he said.
"We set a higher fee-based income growth target for this year, but we need to monitor the markets amid higher uncertainties. The bank needs to continue monitoring the Covid-19 impact and other variants of the coronavirus," Mr Manop said.