Thursday, July 30, 2009

Recession drives Thailand's Kiatnakin Bank's non-performing loans

Writer: SOMRUEDI BANCHONGDUANG

Published: 30/07/2009 at 12:00 AM
Newspaper section: Business

Delayed impacts from the recession may cause Kiatnakin Bank's non-performing loans to rise in the second half despite signs that the economy is improving, the chief executive said.

The bank's distressed debt could increase to 7 billion baht in the second half from 6.6 billion baht currently.

Bad debts would rise in the second half as a result of the recession's delayed effects, even though Kiatnakin's NPLs have been falling since the second quarter and the economy is recovering slowly, said president Tawatchai Sudtikitpisan.

As of June 30, gross non-performing loans totalled 6.57 billion baht or 6.99% of total loans before allowance for doubtful accounts, compared with 7 billion or 7.15% the year before. Outstanding loans net of provisions as of the end of June was 78.67 billion baht.

Auto loans have the highest proportion of NPL, in line with the bank's key business of hire-purchase lending. KK will manage rather than sell the NPLs, as it has expertise in bad asset management and auto leasing, said Mr Tawatchai.

The bank, however, does plan to sell non-performing assets worth 3 billion this year. It sold 958 million baht of NPAs in the first half. The bank's NPA sales slowed as property prices declined in line with the economic downturn.

KK's total loan portfolio stands at 82.39 billion baht. Auto loans account for 56.64 billion baht or 70% of total outstanding loans. The bank's proportion of late payments remains normal at about 10% to 15% of the total loan portfolio.

Mr Tawatchai said the bank would maintain its 2009 loan growth target at 5% after it booked loan growth of 2% in the first half. Hopefully, loan demand would improve in the third to fourth quarters, as seasonal factors and improved performance in the automotive industry take effect, he said.

"Car sales, both new and used, have improved the past two months. This should build consumers' confidence and loan demand in the second half," he said.

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