Monday, June 1, 2009

Thailand's KTC bank expects to cancel 100,000 cards

Late payments rising due to bad economy

Published: 2/06/2009 at 12:00 AM
Newspaper section: Business

Krungthai Card, the country's largest credit-card operator, estimates that it could revoke the accounts of some 100,000 cardholders this year due to debt defaults during the recession.

Cancellation rates have risen to about 4% per month from its base of 1.6 million cards, said Thawatchai Thitisakdiskul, a KTC senior executive vice-president.

Cancellations have doubled from the year before as defaults have jumped during the recession.

"KTC will revoke a card from a customer after a default of more than one month. Normally, we will try to restructure debt for those in distress. If a cardholder can make a payment of just 2% to 3% of their balance, we will still maintain their card status," Mr Thawatchai said.

The Bank of Thailand requires normal credit cardholders to make minimum payments of 10% of their outstanding credit line each month. Cardholders under debt restructuring are waived from the rule.

Mr Thawatchai said 100,000 cards are expected to be cancelled this year, comprising about 6% of the company's card base. Two-thirds will be cancelled by the company under its risk-management guidelines, with the rest cancelled on the request of cardholders themselves.

KTC expects its non-performing loans, now at 2% of total outstanding loans, to possibly rise to 3% to 4% if the economy remains depressed.

Credit-card and loan rejection rates meanwhile have risen to 55% of total applications from 40% in the past as the company has tightened its lending criteria, particularly for workers in industries such as export-oriented companies or small- and medium-sized companies that have been heavily hit by the global downturn.

"The company has become stricter in loan approvals amid the weak economy, in line with risk management practices and our prudent business policies for this year," Mr Thawatchai said.

KTC has a conservative target of 1.6 million outstanding cards at the end of the year, unchanged from last year. For the first five months of this year, new cards totalled 60,000, which is on par with the company's cancellations over the period.

KTC, a unit of Krung Thai Bank, reported first-quarter net profits of 101.28 million baht, down from profits of 216.6 million the same period last year. Total accounts at the end of March totalled 2.15 million, down 2% from the year before, with receivables down to 47.13 billion baht from 48.66 billion at the end of 2008.

Revenues rose 7% year-on-year to 3.1 billion baht for the first quarter, thanks to an 11% increase in interest income and credit usage fees. The company attributed the decline in profits to gains booked in 2008 from Visa.

Shares of KTC on the Stock Exchange of Thailand closed yesterday at 8.2 baht, up five satang, in trade worth 13.43 million baht.

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