Tisco Bank estimates its lending will contract by more than 5% this year as dimmer economic prospects dent car sales and loan demand.
Oranuch: No need to adjust business plan
The bank, where auto loans account for 62.6% of its total lending of 249 billion baht, believes that loans in the second half will shrink at a greater pace than in the first half as the economy continues to falter, said chief executive Oranuch Apisaksirikul.
At the end of June, the bank's outstanding loans had fallen by 5.11% from the end of last year. Its auto loans amounted to 156 billion baht, a sharp drop of 14.5% from 183 billion.
Tisco forecasts domestic car sales will reach about 750,000 units this year, well below the Federation of Thai Industries' projection of 850,000.
Car sales dropped by 16.3% to 369,004 in the first half, with sales in June falling by 18.4% from the same month last year to 60,217. Car sales of 850,000 units will mark a contraction for three years in a row.
"We don't need to adjust our business plan for the remainder of the year because the current economic circumstances are not beyond our forecast. Despite the expected loan contraction, we believe we will book better profitability this year than last year," Mrs Oranuch said.
Tisco Financial Group delivered a 14% year-on-year increase in its first-half net profit to 2.19 billion baht. The improved result was attributable to both higher interest and fee-based income, though it set aside higher loan-loss reserves.
It put aside provisions of 1.24 billion baht in the second quarter on top of 948 million baht in the previous quarter due to rising non-performing loans (NPLs).
The bank does not need to set aside extra reserves for the rest of the year because current reserves are sufficient. It aims to slightly reduce its NPLs to 2.6-2.7% of total loans by the year-end from 2.86% at the end of June.
Stronger risk management and paying off most loans under the first-time car buyer scheme are key factors to improve asset quality, Mrs Oranuch said.
Bank of Ayudhya president and chief executive Noriaki Goto recently said the bank had lowered its lending growth target this year to 4-6% from 7-9% set previously in line with its reduced economic growth projection to 2.7-3.2% from 3.3-3.8%.
The loan target excludes loans transferred from the Bank of Tokyo-Mitsubishi UFJ's Bangkok branch.