BAY targets 10.5% mortgage growth

Bank of Ayudhya (BAY), the country’s fifth-largest bank by assets, aims for 10.5% growth in total mortgages this year, outperforming the industry’s softer forecast of 6%.

“The housing market has entered a new normal where growth has slowed to just one digit and speculation has also decreased,” said executive vice-president Nathapol Luepromchai, who heads BAY’s mortgage division.

He said outstanding mortgages in the overall banking sector are expected to grow by 6% this year, down from 7% in 2016 and 9% in 2015.

“The housing market has been dented by lower demand caused by debt among the younger generation and fiercer competition from a higher number of players,” Mr Nathapol said.

BAY aims for 59 billion baht in new housing loans this year, down 7% from 64 billion doled out last year.

Mr Nathapol said commercial banks expect to make new mortgage loans worth 573 billion baht this year, down 2% from 586 billion in 2016.

During the January-June period, BAY recorded 25 billion baht worth of new mortgage lending.

“The housing loan market is normally more active in the second half, due to the high number of real estate projects launched during the period,” Mr Nathapol said.

Bad loans are expected to improve in the second half of 2017 and support new housing loans.

Commercial banks’ ratio of bad housing loans fell to 3.06% at the end of the second half from 3.23% at the end of the first quarter, according to Bank of Thailand data.

BAY’s bad housing loans fell to 2.4% at the end of June from 2.6% at the end of last year.

The bank aims to cap its bad-debt ratio at 2.6% by year-end.

Mr Nathapol said the bank already reached the targets set out under a threeyear plan (2015-17) of 135 billion baht in new mortgages and 187 billion in mortgages outstanding in the first half of 2017.

Between 2015 and the end of June this year, the bank extended 140 billion baht worth of new housing loans, bringing loans outstanding to 205 billion.

The housing market is expected to improve slightly, with mortgage growth of 6-7% expected next year, Mr Nathapol said.

BAY shares closed yesterday on the Stock Exchange of Thailand at 38.25 baht, unchanged, in trade worth 7.99 million baht.