KBank leery of renewables amid intense competition
Kasikornbank (KBank) is becoming wary of extending finance to hydropower, and wind and solar farm projects due to the narrowing interest margin caused by intense competition.
The country’s fourth largest lender by assets is searching for new areas of alternative energy with higher interest spread to maintain its leadership in the segment, executive vice-president Suwat Techawatanavana said.
The bank over the past several years has been enthusiastic about offering financial facilities to renewable energy projects, grabbing a majority market share.
Mr Suwat said that loan demand from l arge corporate companies is picking up for short-term working capital, long-term project finances, and financial support for domestic merger and acquisitions.
KBank aims for corporate loan growth of 4.6% this year from wholesale loans outstanding at 512 billion baht last year.
The central bank governor Veerathai Santiprabhob recently said commercial bank loans are expected to pick up this year as rising borrowing costs in the bond market and higher private investment ramp up loan demand.
Outstanding bank loans expanded 2% at end-2016, slowing from 4.3% growth in the previous year, the lowest since a 1.7% contraction in 2009.
Growth in business loans slowed down to 0.6% at the end of 2016 from 3.1% at the end of 2015.
The bank also aims to maintain its nonperforming loan (NPL) ratio of corporate loans at the current level of 1.5% throughout this year amid the positive loan growth.
The Bank of Thailand earlier reported that corporate loan NPLs for the overall banking sector stood at 1.9% in the third quarter last year.
KBank controls the bad-debt ratio of corporate loan through its stringent risk management and compliance with the Bank of Thailand’s single lending limit (SLL) requirement.
“We’ve maintained SLL at 21-22%, lower than the central bank’s ceiling regulation at 25%,” Mr Suwat said.
Even though the central bank allows commercial banks to lend to a particular group of companies exceeding the SLL’s restriction on a case-by-case basis, KBank has never asked the Bank of Thailand for the exemption, he said.
KBANK shares closed on Friday on the SET at 198 baht, down 50 satang, in heavy trade worth 2.8 billion baht.