SET-listed Thitikorn Plc (TK), Thailand's largest motorcycle loan provider, plans to be more stringent on loan approvals as interest rates rise and an economic slowdown is anticipated next year.
The stricter approval criteria is expected to increase the loan rejection rate from this year, aiming to prevent a rise in non-performing loans (NPLs), said deputy managing director Prapol Phornprapha.
Thitikorn's NPLs stand at around 4%, in line with the leasing industry's average ratio.
Mr Prapol said the company will not raise its lending interest rate immediately despite the hike in Thailand's policy interest rate, as Thitikorn has been prepared funding sources in preparation for a higher interest rate.
Rising interest rates are not projected to affect Thitikorn's lending cost because the company has already prepared funding sources for the next two years, he said.
"We have funds for business expansion and have increased loan [approvals] for the past two years," said Mr Prapol.
"Those who have not prepared [for rising interest rates] will face stiffer competition because of higher operating costs, as hire-purchase loans have fixed interest rates throughout the contract."
Thitikorn's motorcycle leasing performed well in the first half, but loan growth slowed in the second half based on weak farm prices and high household debt, said Mr Prapol.
Although the household debt ratio has reduced, it could edge up next year as an economic slowdown and continued low crop prices are expected, he said.
Thailand's household debt rose to 12.3 trillion baht, or 77.6% of GDP, in the year's second quarter, up from the first quarter's 12.1 trillion baht, according to Bank of Thailand data.
The Sino-US trade dispute is an external concern affecting global trade worldwide and the company is monitoring the issue closely because it affects economic growth, said Mr Prapol.
Emerging countries with current account and trade account deficits will be affected by currency depreciation next year, he said.
Despite looming uncertainties, Thitikorn plans to expand its domestic and overseas branches next year.
The company plans to increase branches in Cambodia from six to 12 and add another three branches to the existing three branches in Laos as demand for motorcycle ownership remains high in these two countries, said Mr Prapol.
For Thai branches, Thitikorn will add another 4-5 branches to the existing 92 as of November.
Revenue is expected to continue growing next year, but the growth ratio is projected to be lower than this year because of the Sino-US trade dispute's expected impact on global economic growth.
Thitikorn will tighten loan approvals as a result, he said.
TK shares closed on Monday on the SET at 8.75 baht, up 10 satang, in trade worth 647,000 baht.