Debt collectors descend as bad loans mount
Surge in delinquency fuels portfolio growth
As most companies turn cautious during the economic slowdown, debt collectors are going full throttle to capitalise on bad loans clogging financial institutions' balance sheets.
JMT Network Services, an SET-listed debt collector, aims to raise outstanding non-performing loans (NPLs) under management to 100 billion baht at the end of this year from the current 72 billion before growing to 200-300 billion in the next few years, said chief executive Piya Pong-acha.
A surge in delinquent loans at financial institutions is expected to drive JMT's portfolio growth. And while bad loans are still minimal when compared with total credit, financial institutions want to prevent the problem from snowballing.
A slackening economy and spiralling household debt — the latter a remnant of the Yingluck Shinawatra government's tax refund scheme for first-time car buyers — have hurt borrowers' debt-servicing ability, with low-income earners and small and medium-sized enterprises (SMEs) among the most vulnerable.
According to central bank data, outstanding NPLs for commercial lenders at the end of March totalled 298 billion baht, up by 21.1 billion from the previous quarter, while total loans stood at 13 trillion baht. The gross NPL ratio at the end of March rose to 2.29% from 2.15% in the prior quarter.
The consumer NPL ratio rose to 2.62% at the end of the first quarter from 2.39% at the end of December, valued at 92.4 billion baht. Bad consumer loans increased across every segment in the first quarter, with credit card NPLs rising to 3.9% from 3.2% and worth 7 billion baht, while personal loan NPLs rose to 2.8% from 2.5%, tallying 21.6 billion baht.
Housing NPLs rose to 2.4% from 2.2%, valued at 41.1 billion baht, with car NPLs edging up to 2.6% from 2.5%, totalling 22.6 billion baht. SME NPLs surged to 3.30% from 3.11%, valued at 149.3 billion baht, while corporate NPLs rose to 1.14% from 1.13%, with 56.6 billion baht recorded.
The central bank has warned that NPLs will rise again in the second quarter, especially for SMEs and personal loans.
JMT plans to acquire 15 billion baht worth of bad loans from financial institutions this year. Of the company's total NPLs under management, 60% are credit card and personal loans and 40% are auto and motorcycle loans. The proportion is expected to level out at 50:50 by year-end.
Auto bad loans from the first-time car buyer scheme are spilling over to the commercial vehicle segment — six- and eight-wheel trucks. Rising commercial vehicle NPLs also reflect deterioration of SME loan assets.
"We plan to dip our toes into commercial loans," Mr Piya said. "We're negotiating with several banks to buy their SME bad loans, and the new business is expected to start by the second quarter next year."
ACS Services (Thailand), a subsidiary of Aeon Thana Sinsap (Thailand), also plans to expand its business in terms of bad assets under management and the customer base, said executive vice-president Suriporn Thammavatid.
ACS offers debt management services for mortgage, hire purchase, credit card and personal loans.
Bangkok Commercial Asset Management (BAM), the country's biggest asset management firm, has revised its full-year budget for bad-asset acquisitions to 10.5 billion baht from 7 billion previously after a sharp rise in financial-sector bad loans.
Krungsri Consumer, an unsecured loan unit under Bank of Ayudhya, has set up a provincial debt collection centre in Chon Buri as a pilot project.
The company has no policy to divest itself of delinquent loans, as it has its own collection team that performs well in recovering troubled debt, said managing director Thakorn Piyaphan.
The company earlier increased its debt collection staff by 200 to the current 1,200.