BAY’s SME loan growth beats forecast

Japanese customers help defy slowdown

Bank of Ayudhya (BAY) says its small and medium-sized enterprise (SME) loans during the first six months expanded at a faster pace than expected, outpacing industry-wide gains, largely due to loan growth for supply chains and trade finance.

BAY’s outstanding SME loans grew by 7.6% from the end of 2016 to 319 billion baht at the end of June.

The banking industry’s SME loans expanded by 3-4%, said Sayam Prasitsirigul, head of BAY’s SME Banking Group.

The bank had earlier targeted 6.8% SME loan growth this year.

For the January-to-June period, the bank’s SME loans for supply chain solutions registered an impressive rise of 20% from the end of last year, while trade finance rose 17%.

These two areas were largely supported by Japan-related businesses under the network of its major Japanese shareholder, Mitsubishi UFJ Financial Group (MUFG).

“Our advantage of having a Japanrelated customer base is it has emerged as a key strength driving our SME loan growth amid the sluggish economy,” Mr Sayam said. “Even though the bank’s [SME] loan growth rate already exceeded the full-year target, we are currently keeping our target unchanged.”

BAY, the country’s fifth-largest lender by assets, plans to reconsider its overall 2017 business plan after business segments across the board performed well in the first half.

Moreover, the bank’s projected brighter economic outlook, both locally and globally, prompted the planned revision.

During the uneven economic recovery in the first half, the bank paid more attention to risk management, helping keep its non-performing loan ratio for SMEs at 4.2%.

The bank is maintaining that 4.2% ratio for the year.

BAY said its bad SME loan ratio is below that of several other banks, thanks to the good asset quality of its SME customers.

SME loans represented 15% of BAY’s total outstanding loans for the first half.

That ratio is unchanged from the end of last year due to positive growth across the bank’s business segments.

Mr Sayam said the bank has continued to adopt digital technology, including an electronic invoice presentation and payment system.

It has also adopted request to pay, blockchain’s interledger, and PromptPay’s service for corporate clients to serve SME customer demand.

BAY is one of two banks which are testing out blockchain technology in the central bank’s regulatory sandbox, with that innovative service soon expected to be rolled out commercially.

Some 2,000 SME customers have signed up for PromptPay’s corporate service, which is expected to be launched by year-end.

BAY shares closed yesterday on the Stock Exchange of Thailand at 38.50 baht, up 1.25 baht, in trade worth 51.7 million baht.