Friday, October 31, 2008

Thailand's Kiatnakin Bank eyes distressed assets

SOMRUEDI BANCHONGDUANG

Kiatnakin Bank foresees growth opportunities in managing distressed assets as the global economy enters recession in 2009.

President Tawatchai Sudtikitpisan said debt management would be a core business for 2009 together with auto hire-purchase and commercial loans.

"We believe financial institutions will look to sell off low-quality loans to reduce their risks under the current global market turmoil and economic slowdown," he said. "We see a good opportunity to get back into the debt-management business next year."

Kiatnakin has considerable experience in debt management, having been a major bidder for distressed assets sold during the 1997 economic crisis by the Financial Sector Restructuring Agency.

Mr Tawatchai said the bank would consider bidding on loan assets from both local and foreign institutions. He declined to put a figure on the bank's potential investment, saying this would depend on opportunities available in the market.

Auto hire-purchase loans now represent the bulk of Kiatnakin's operations and comprise 70% of its total loan portfolio.

The bank reported a nine-month net profit of 1.53 billion baht, up from 1.48 billion the year before. Third-quarter net profit rose 20% year-on-year to 674 million baht, with interest and dividend income up 31.6% year-on-year thanks to loan growth of 19.8% over the first nine months.

Kiatnakin had 106.56 billion baht in assets at the end of September, up 22.2% from the end of 2007. Gross non-performing loans were 8.56% of total loans, down from 12.45% at the end of 2007.

Hire-purchase assets totalled 55.7 billion baht at the end of September, up 30.3% from the end of January, while residential project loans fell 10.6% over the first nine months to 13.57 billion.

Mr Tawatchai said the poor economy has caused bad loans to be slightly higher than the bank's gross non-performing loan target of 8% of total loans.

The bank has tightened its loan approval procedures and its monitoring of existing clients. Down payment conditions for car buyers have also been raised from between 5% and 10% to between 15% and 20% of the purchase price. The bank also now requires buyers to have a monthly income at least double their debt payments.

"We still aim to bring down our bad loans to match the industry average of 6% of total loans by the end of the year," said Mr Tawatchai.

For 2009, Kiatnakin now expects loan growth of just 10% from this year due to the economic uncertainties.

KK shares closed yesterday on the Stock Exchange of Thailand at 13.40 baht, down 30 satang, in trade worth 9.5 million baht.

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