TMBThanachart Bank (ttb) has doubled its debt restructuring portfolio for auto loans in an effort to contain non-performing loans (NPLs) in its consumer finance segment.
According to ttb president Thakorn Piyapan, debt restructuring for the bank's auto hire-purchase loans has risen for several months, averaging around 10-12 billion baht per month, double the 5-6 billion baht per month at the end of last year.
In contrast, debt restructuring for mortgages has remained steady at about 2-3 billion baht per month since last year, attributed mainly to many mortgage customers struggling to make payments having already entered debt restructuring programmes during the pandemic.
Mr Thakorn said the bank's debt restructuring portfolio has grown as part of a preemptive strategy to control bad debt.
The bank encourages retail customers who show signs of weakened debt servicing to enter the debt restructuring programme as a preventive measure, as part of the Bank of Thailand's responsible lending guidelines.
The debt repayment ability of auto loan and mortgage customers, particularly those earning less than 30,000 baht per month, has declined as Thai economic growth slows.
Amid an uneven economic recovery, the income of certain segments has not increased, affecting their ability to service debt, noted ttb.
"The bank's NPLs for auto and mortgage loans are expected to rise by the end of this year, but the increase will be marginal, around 0.1-0.2%, thanks to preemptive debt restructuring," Mr Thakorn said, adding the bank's NPL ratio for auto and housing loans is roughly 1% and 2%, respectively.
He said given the higher credit risk associated with auto and housing loan clients, the bank has tightened its criteria for new consumer loans, which comprises a large portion of its total retail loan portfolio. Ttb is also focusing on asset quality, as suggested in the central bank's responsible lending practices.
The bank's retail loan growth for this year is expected to be lower than it targeted, attributed to pressure from auto and housing loans. However, unsecured loan products such as credit cards and personal loans are expected to show marginal growth.
According to ttb's financial statement to the Stock Exchange of Thailand, the bank's retail lending on a consolidated basis fell by 1.6% quarter-on-quarter and 2.8% year-to-date in the second quarter of 2024.
Given weak consumer demand and price volatility in the auto market, ttb's hire-purchase portfolio declined by 3.3% quarter-on-quarter and 4.8% year-to-date in the second quarter.
Mortgage lending contracted by 0.7% quarter-on-quarter and 1.5% year-to-date, ttb said in the statement.
In response to rising credit risk, the bank plans to grow its auto loan and mortgage portfolios selectively, focusing on upper-income consumers earning between 30,000-50,000 baht per month.
Mr Thakorn said the bank will monitor the debt repayment ability of this client segment.
