BAY bumping SME loan ratio up to 18-20% to balance portfolio

Bank of Ayudhya (BAY) plans to raise its small and medium-sized enterprise (SME) loan ratio to 18-20% of loans outstanding in the next three years as the bank seeks to balance its loan portfolio.

BAY also aims for low double-digit percentage growth in new SME loans this year, compared with over 10% last year, said head of commercial banking Pornsanong Tuchinda.

BAY’s total SME loans amounted to 221 billion baht, representing 14% of the bank’s total lending of 1.55 trillion baht, at the end of last year. Retail loans made up the largest slice at 47% of total loans, Thai corporate loans accounted for 28%, and loans to Japanese corporations and multinational corporations made up the rest.

Mr Pornsanong said SME loans, a highyield segment, would contribute better income to the bank.

BAY’s commercial loan portfolio, consisting of SME and Thai corporate loans, is expected to grow in a range of 6-8% this year, he said.

The country’s fifth-largest commercial lender by assets has improved its internal processes, technological systems, and digital platform over the past few years in preparation for the SME expansion.

The improving economic momentum, the government’s policy to support SMEs and the low-interest environment will come as a boon to SME loans, Mr Pornsanong said. The bank has managed to keep SME non-performing loans (NPLs) at a satisfactory level, he said.

“Our NPL ratios of commercial loan, corporate loan, and SME loans are lower than the industry average and we will continue to maintain it at a low level this year,” he said. “We believe the banking sector’s NPLs have already peaked and will gradually decline.”

For the corporate banking segment, the bank is focusing on financial solutions spanning from loans and advisory services to partnerships to keep pace with wholesale customer demand.

A number of local large corporations have expanded to become global corporate firms and require financial solutions for global platform, which BAY expects to be able to provide, given the bank’s local expertise and global strength.

BAY, a unit of the Japan-based Mitsubishi UFJ Financial Group with global networks in 50 countries, needs to strengthen its investment banking and capital market areas to support global financial solutions for both local and multinational corporate clients’ inbound and outbound investments.

Mr Pornsanong said the government’s flagship Eastern Economic Corridor (EEC) project has attracted foreign investors globally, particularly from Japan, China, the US and the EU.

Many foreign investors are in talks about their potential investment projects here with the bank, so the EEC would create more business opportunities for the bank in the longer term.

BAY shares closed yesterday on the Stock Exchange of Thailand at 44 baht, up 25 satang, in trade worth 35.2 million baht.