Borrower loss hits BAY unit

Krungsri Consumer, an unsecured loan unit under Bank of Ayudhya (BAY), saw the number of new personal loan customers fall by 2% in the first half, hurt by the Bank of Thailand’s tightened personal loan and credit card regulations for those earning less than 30,000 baht a month.

The company acquired 185,000 new personal loan customers for January to June, down 2% year-on-year, which it attributed to the central bank’s requirement limiting those earning up to 30,000 baht a month from borrowing from more than three financial institutions, said Thakorn Piyapan, chairman of Krungsri Consumer.

The 2% decline, however, is better than the unit expected as it braces for a 5% contraction in the first half. The partnership strategy and digital lending will facilitate new customer growth this half, pushing it to no growth for the year, he said.

But the central bank’s stringent measures will help bring down Krungsri Consumer’s non-performing loans (NPLs) to 2.83% at the end of June from 3.06% in the previous three months.

Krungsri Consumer aims to maintain its current NPL ratio until the end of the year.

The Bank of Thailand has limited personal loan borrowers who earn less than 30,000 baht a month from being granted more than 1.5 times monthly income per creditor.

The central bank tightened controls on unsecured loans to put a lid on household debt and rising NPLs. That measure has been in force since September 2017.

“The improving asset quality is supported by the upper-income customer segment under a partnership strategy with large corporations,” Mr Thakorn said. “On average, monthly income of First Choice, its personal loan brand, has increased to 12,000-13,000 baht from 10,000 previously.”

For the first half, the unit acquired 410,000 new clients for both personal loans and credit cards, rising 5% year-on-year.

The number of the bank’s new credit cardholders jumped by 9% year-on-year to 225,000 in the first half.

The unit’s total outstanding unsecured loans amounted to 140 billion baht, growing 6% year-on-year.

Krungsri Consumer’s credit card spending surged by 9% year-on-year to 165 billion baht for the first half, compared with its 10% growth target for the full year.

The bank managed to cut its credit card bad-loan ratio to 1.12% at the end of June from 1.24% at the end of March.

Mr Thakorn said the unit has been adopting artificial intelligence technology in four key areas — sales and marketing, debt collaboration, call centres and data analytics — to improve business operations.