KTB Leasing Co, a subsidiary of Krungthai Bank, will soon join hands with a local strategic partner with used-car expertise to introduce a new business model to standardise the used-car market's pricing and quality.
Phinyavat: Move will reduce market risks
Managing director Phinyavat Chantrakantanond said the move is aimed at setting long-term standards for the used-car industry and improving used-car loan quality.
Used-car loans are among the most-watched categories of non-performing loans (NPLs), and local auto lenders' bad used-car loans have increased.
Some of these NPLs are strategic _ debtors have the ability to pay but refuse to do so after market prices of second-hand vehicles plunged in the wake of the government's first-time car buyer tax incentive.
The drop in used-car prices has compelled several auto lenders including KTB Leasing to slow down their used-car loan business to control asset quality.
A new innovative business model will be introduced this month, Mr Phinyavat said.
The proportion of used-car NPLs in the industry is expected to increase by double digits, but KTB Leasing's are within the industry's range.
"We expect our new business model for used-car loans will keep used-car NPLs at not more than 5% of our outstanding loans," he said.
The company's used-car loans amount to 3.75 billion baht or 15% of its total individual auto loan portfolio of 25 billion baht, and the ratio is expected to decline to 12-13% by year-end amid the current market environment.
Mr Phinyavat said the company's new business model will also help to reduce market risk, given the better standards of the used-car market.
Its used-car dealer network stands at about 1,000 nationwide.
Auto loans represent the company's largest proportion at 54 billion baht or 90% of total credit of 60 billion baht, while hire-purchase loans for consumer products make up the rest.
Of the total auto loans, 25 billion baht went for personal cars, both new and used, and the other 29 billion for commercial vehicles.
KTB Leasing has expanded into the heavy-vehicle loan segment, given its lower competition and good margin.
Its personal new-car loans are expected to grow to 28-29 billion baht by year-end from the present figure of 25 billion, in line with the country's expected growth in new-car sales.
The company has financed 10,000 vehicles under the government's first-time car buyer scheme, with only three loans classified as NPLs to date.
About the author
- Writer: Somruedi Banchongduang
Position: Business Reporter