Siam Commercial Bank (SCB), the country's biggest mortgage lender, is focused on offering high-yield housing loan products to the high-risk, Gen Y segment to keep up with rising demand from young borrowers.
The bank's plan to concentrate on high-yield mortgages is in line with SCB's Going Upside Down strategy, said Jamaree Ketrakoo, first executive vice-president. The focus is on cash-out refinancing loan product, My Home My Cash.
The interest rate for My Home My Cash ranges from 5.5% to 9% annually, depending on home collateral and the risk profile of customers. In comparison, typical housing loan rates start from over 3% per year.
The bank forecast 10 billion baht in loans from My Home My Cash this year, up from 8 billion last year. Outstanding cash-out refinancing loans for SCB amount to more than 50 billion baht.
Gen Y customers are those born between 1980-1997, or aged 20-37, and are the bank's main target for both home loans and cash-out refinancing mortgages, as their demand for such products has increased. They are also target customers for many residential developers.
In terms of customer numbers, the younger client ratio shares a larger slice of the bank's home loans at 35%, up from 30% last year. The larger proportion could be attributed to positive loan demand in the customer segment.
"Even though Gen Y is high risk based on central bank and National Credit Bureau (NCB) data, the risk is controllable. We've adopted a new credit scoring model with artificial intelligence technology," she said.
According to the NCB data, millennials controlled the largest slice of housing loans in terms of new accounts at 53% last year, followed by Generation X at 38%, with baby boomers accounting for the rest. There were 359,583 new housing loan accounts in 2017.
Gen Y's soured housing loans surged to more than 70,000 last year from marginally above 60,000 in the previous year, and their delinquent share also jumped to above 80 billion baht in 2017 from 70 billion in 2016.
The technology, which was adopted late last year, has helped improve the bank's loan analysis and debt collection efforts. The bank is therefore confident it can control asset quality for both housing loans and cash-out refinancing products.
The bank's home loan portfolio is 630 billion baht, of which 2.8% has turned sour.
Meanwhile, Ms Jamaree said the bank plans to launch a digital mortgage lending function on its mobile banking app, SCB Easy, in July.
As Gen Y constitutes a large share of mortgage loan applicants on SCB's digital platform, the channel is expected to help facilitate loan growth of the segment, she said, adding that the bank targets 4-6% growth in its housing loan portfolio this year.