KTC keys on high-end loans

KTC keys on high-end loans

KTC is focusing on the higher-income segment to adapt to tighter lending regulations.
KTC is focusing on the higher-income segment to adapt to tighter lending regulations.

Krungthai Card (KTC) is focusing on the high-income market for personal loan products, in line with the Bank of Thailand's tighter regulations on unsecured loans that took effect on Sept 1.

The market for personal loan products will be directly affected by the central bank's new regulations, said president and chief executive Rathian Srimongkol.

KTC customers whose monthly income is lower than 30,000 baht represent 70% of its total clients, covering both personal loans and the credit card segment.

The new regulations governing personal loans state that borrowers earning less than 30,000 baht a month are granted no more than 1.5 times monthly income per creditor, and those earning at least 30,000 are entitled to a maximum five times per creditor.

Those earning below 30,000 baht a month are also limited to three personal loan creditors, while there is no restriction in terms of the number of creditors for those earning 30,000 baht or more.

The new rules have prompted KTC to focus on the high-income segment for new personal loan product customers, said Mr Rathian. Risk control is another reason to expand into this customer base, he said.

KTC, the country's leading provider of unsecured loans, reported non-performing loans of 1.57% for its total loan portfolio as of June, covering both credit cards and personal loans. The bank's bad debt ratios for credit cards and personal loans stood at 1.22% and 0.88%, respectively.

Mr Rathian said the new regulations will not affect the bank's credit card business in terms of new card acquisitions because it already concentrates on the high-income segment -- those earning above 30,000 baht per month.

The central bank requires that credit card applicants have minimum income of 15,000 baht per month.

But the central bank's new regulations on reducing the credit card interest rate from the previous 20% per annum to 18% is anticipated to affect the company's revenue. KTC projects its interest income will decline to 700 million baht this year.

Under such a scenario, funding cost management will be employed to maintain positive long-term profitability. The bank plans to issue long-term bonds, with five to ten-year maturity, in order to lock in cheap costs, said chief financial officer Chutidej Chayuti.

KTC plans to float new debentures totalling 15.5 billion baht until the end of 2018, of which 3.5 billion is expected to be issued by year-end to replace existing bonds. The bank expects to maintain its financial costs at the existing level of 2-3.3% in 2018.

As digitisation is a key business strategy controlling long-term operational expenses, KTC plans to accept credit card payments via quick-response code technology next month. It will be the first credit card issuer to adopt such technology.

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