Bangkok Commercial Asset Management (BAM), Thailand's largest asset management company, set an ambitious goal for bad asset management over the next few years in a bid to address the burden of distressed debts within the banking industry.
Despite a sluggish pace for business performance this year amid a weak economic outlook, BAM remains confident of achieving its targets for 2024, chief executive Bundit Anantamongkol said in an exclusive interview with the Bangkok Post.
Better signs
From 2023 through the beginning of this year, he said the company encountered heightened challenges in managing the collection of non-performing loans (NPLs) and non-performing assets (NPAs), primarily related to economic circumstances.
Fragile economic growth, partly stemming from the government's delayed budget disbursement for fiscal 2024, created a cascading effect on consumer spending and repayment of borrowers' debts.
Mr Bundit said the delayed budget disbursement directly affected the building and construction industry, which is closely linked with government investment projects.
This adverse factor indirectly affected other sectors, notably causing liquidity shortages, he said.
As a consequence, customers prioritised spending on other objectives over debt repayment, said Mr Bundit.
Given this context, debt collection in January 2024 was sluggish. However, there was a notable improvement in February, attributed to a clearer outline for fiscal budget disbursement.
Disbursement started in the second quarter of this year.
"With a clearer outlook, business confidence in both investment and debt repayment was bolstered," he said.
"This positive momentum bodes well for our collection efforts."
While the collection figures were slightly below target at the beginning of the year, the company remains optimistic about achieving its full-year business goals, buoyed by the improving trajectory of the Thai economy.
Mr Bundit says the company set an ambitious collection target of 20 billion baht for non-performing loans and non-performing assets.
Full Confidence
BAM set an ambitious collection target this year of 20 billion baht in NPL and NPA management.
Collection this year has reached around 40% of the full-year target, said Mr Bundit.
He said achieving this year's collection target would signify growth for BAM in 2024, following a net profit decline the previous year.
In the first quarter of 2024, the company reported a net profit of 423 million baht, up 58.7% year-on-year.
The growth was driven by total operating income of 2.29 billion baht, a gain of 15.2% year-on-year.
The higher revenue was attributed to increased interest income and gains from managing NPLs and NPAs, resulting from improved collections from debtors and NPA buyers, said Mr Bundit.
BAM also set healthy targets for the next few years, aiming to increase collections to 23.3 billion baht by 2026.
The company allocated a total budget of 9 billion baht for purchasing bad assets this year.
Despite an ample supply of both NPLs and NPAs in the market, the company plans to adopt a selective approach in acquiring distressed assets, he said.
"The company will prioritise high-potential assets, facilitating easier management during a sluggish economy," said Mr Bundit.
Banks have slowed the sale of bad assets because of lower auction prices as supply increases. Despite the upward trend in NPLs, banks are adopting a selective approach to asset sales.
If the Thai economy continues its recovery, auction prices are expected to gradually stabilise, thereby improving NPL management, he said.
Mr Bundit said he expects NPL sales in the banking industry to surpass 100 billion baht this year, a dip from 170 billion last year.
While banks are expected to sell a higher volume of unsecured loans this year, BAM is focusing on secured loans, he said.
Joint ventures
BAM is pursuing the establishment of joint venture asset management companies (JV-AMCs) through collaborations with financial institutions.
The company is in discussions with four financial institutions to assess the feasibility of establishing four JV-AMCs, with two potential partners showing strong indications of progressing towards an agreement, said Mr Bundit.
According to the Finance Ministry, the Government Savings Bank (GSB) and BAM are in the process of establishing a JV-AMC, with each holding a 50% stake.
GSB will transfer 40 billion baht worth of debts, comprising 400,000 accounts, to the JV-AMC for management, said the ministry.
The transferred debts will not exceed 20 million baht per account.
BAM is Thailand's No.1 asset management company with total NPLs under management of around 500 billion baht.
Leveraging its extensive experience, the company is poised to address the banking industry's bad debt challenges, said Mr Bundit.
"Our business model not only alleviates the nation's high household debt, but also offers borrowers a pathway out of the debt cycle, thereby enhancing their financial well-being," he said.
The company also wants to enhance its income from NPL management by sharing investments and risks with its bilateral partners, said Mr Bundit.
Under the JV-AMC model, each partner holds an equal 50% stake.
Each tentative JV-AMC will specialise in managing the bad assets of its respective bank partner.
The bad debt profiles of financial institutions vary depending on the business models of each bank.
BAM's main focus is managing secured bad debts, excluding auto loans.
The JV-AMC partnership model caters to the NPL management needs of each bank, targeting specific types of bad assets, he said.
Digital Restructuring
As a data-driven organisation, the company expedited the establishment of a customer service system for online platforms, incorporating a payment system and an e-TDR (electronic debt restructuring troubleshooting) system within the BAM mobile app.
Through the company's data centre, BAM facilitated various functions including a property purchase reservation/payment system, a debt monitoring/repayment system, and data management dashboards.
The company also implemented a lead management system to gather information from target groups interested in BAM's products, said Mr Bundit.
This advancement in digital technology not only enhances BAM's ability to close sales, but also improves its efforts in debt restructuring, he said.
