BAM beefs up on bad bets

Bangkok Commercial Asset Management Co (BAM) has raised its budget for bad asset acquisitions from financial institutions to 10.5 billion baht this year to capitalise on rising nonperforming loans (NPLs).

The country’s largest asset management company made the move due to higher supply in the market, senior executive vice-president Somporn Moonsrikaew said.

It previously set a 7-billion-baht budget for bad-loan acquisitions. For the five months through May, BAM spent 4 billion buying bad assets.

A number of banks are unloading their NPLs worth 1-3 billion baht each. Moreover, the country’s two biggest lenders have signed contracts to dispose of their non-performing assets (NPAs) worth trillions of baht.

Outstanding NPLs for commercial lenders at the end of March totalled 298 billion baht, up by 21.1 billion from the previous quarter, while total loans stood at 13 trillion. The gross NPL ratio at the end of March rose to 2.29% from 2.15% in the preceding quarter.

The central bank recently forecast that NPLs would keep rising in the second quarter, particularly for small and medium-sized enterprises (SMEs) and personal loans.

The bad loans from financial institutions are largely mortgages and SME loans. Several banks opt to sell NPLs and NPAs as a quick way to lower their burden for setting aside loanloss provisions.

One large bank recently had unprecedented sales of its legacy NPAs, Mr Somporn said.

He said BAM had purchased creditcard loans as a pilot project for unsecured bad loans worth 200-300 million baht from a bank for two years but managed to collect only 30% of the buying price. Collection could take a long time, as the loans are only 10,000 to 20,000 baht per borrower.

NPLs are loans that are more than 90 days overdue, while NPAs are defined as NPLs or assets used as collateral for loans that have turned sour and are being liquidated.