Tisco sees high-yield lending strategy spurring NPLs
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Tisco sees high-yield lending strategy spurring NPLs

Mr Sakchai gestures during an interview with the Bangkok Post. (Photo: Varuth Hirunyatheb)
Mr Sakchai gestures during an interview with the Bangkok Post. (Photo: Varuth Hirunyatheb)

Tisco Bank expects its non-performing loans (NPLs) to rise this year as the bank focuses on high-yield loans in an effort to enhance returns.

According to chief financial officer Chatri Chandrangam, the bank anticipates NPLs increasing throughout the year, primarily because of a concentration on high-yield loans, especially for its car title loan products.

The auto cash service is operated by the bank's subsidiary Hi-Way Co under the Somwang brand.

Tisco Financial Group, the holding company of Tisco Bank, informed the Stock Exchange of Thailand that the bank's NPL ratio for the first quarter of 2024 was 2.27%, up from 2.13% year-on-year.

"In line with our focus on high-yield loans, we will allow our NPL ratio to reach 2.5% this year, a level we deem manageable and conducive to improved returns," he said.

For the first quarter of 2024, the bank's yields on loans increased to 7.63%, up from 7.24% year-on-year.

However, Tisco reported a 3.3% decline in net profit for the period to 1.73 billion baht.

This dip was attributed to a slowdown in non-interest income and higher expected credit losses, according to the company's financial statement submitted to the SET.

Chief executive Sakchai Peechapat said the bank wants to continue expanding its car title loan business under the Somwang brand to meet growing demand. The bank plans to expand its Somwang branches to 1,000-1,200 by year-end, up from the existing 650 branches nationwide.

"The expansion of physical branches will cater to the demand for auto cash services, particularly among lower-income customers, who mostly live in rural areas," said Mr Sakchai.

Tisco, a small bank, is known for its expertise in hire-purchase and related auto loan businesses.

Hire-purchase loans dominated the bank's portfolio, totalling 105 billion baht out of a total outstanding loan portfolio of 235 billion baht.

Car title loans amounted to 41.9 billion baht as of March this year.

Mr Sakchai said the bank will continue its auto loan growth strategy with a focus on selective lending, responsible lending practices and sustainability.

The consumer loan growth would align with the Thai economic recovery, automotive industry trends, and household debt dynamics in Thailand, said Mr Sakchai.

In response to rising demand for electric vehicles (EVs), Tisco plans to allocate more resources this year to EV loans. The bank's EV loan penetration rate rose to about 20% in the first quarter of this year, up from 12% last year.

Mr Sakchai said steady policy rates and an anticipated downward trajectory would bolster the auto loan business and enhance car buyers' ability to repay debts for this year.

Tisco believes the Bank of Thailand will cut the policy rate in the latter half of 2024, with expectations for only one rate cut this year.

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