TBank upbeat despite woes in old-car market - The Nation

TBank upbeat despite woes in old-car market - The Nation:

TBank upbeat despite woes in old-car market


Sucheera Pinijparakarn
The Nation August 13, 2013 1:00 am
Falling prices, bad debt sap performance; pins hope on new car, cash-for-car loans

Thanachart Bank, the country's largest provider of auto instalment loans, is optimistic its growth could hit the target of 10-15 per cent this year even though the used-car market is facing rising bad debt and falling prices. 

Growth will be mainly driven by new-car and cash-for-car loans, Anuchart Deeprasert, a senior director, said yesterday.

Used-car loans may expand by only 10 per cent versus the projection of 20 per cent in line with the slowdown in this segment. 

TBank's instalment-loan business rose by 8.75 per cent in the first half, thanks to last year's first-car scheme by which the government offered tax breaks.

Used cars account for 25 per cent of its auto-loan portfolio of Bt400 billion.

TBank reported a rise in non-performing loans to 4.45 per cent in the second quarter from 4.22 per cent in the first quarter, partly because of souring used-car loans. In the second quarter, TBank provisioned Bt5 billion against bad loans to comply with the Bank of Thailand's requirement. 

About 20 per cent of the additional reserves were for used car loans. 

The used-car market suffered from the first-car-buyer scheme because of the tax refund of Bt100,000. Even though the incentive has expired, captive leasing companies are aggressively promoting new-vehicle sales by offering attractive campaigns, causing used-car prices to plunge.

High household debt has also crimped debt-repayment ability, so more used cars are being repossessed.

Auto lenders are witnessing the same situation, said Anuchart, who is also chairman of the Thai Hire-Purchase Association.

TBank is concerned about the quality of its debtors. It will offer customers debt restructuring and an instalment payment extension instead of repossessing their cars. The loan term will be lengthened to 84 months from 60 months to help ease the financial burden on used-car borrowers.

The bank has extended the floor financing payment term for used-car dealers to 150 days from 90 days after they ran into difficulties in moving inventory. 

The bank did not slow down its used-car loans. It just wants to avoid such loans going bad. TBank has increased the down payment to 20-25 per cent from 10 per cent. The rejection rate for used-car buyers has gone up after the bank adjusted its credit scoring by rejecting D-grade applicants instead of approving them as before.

Sales of new vehicles are expected to resume next quarter instead of late this quarter as had been expected. The new Toyota eco-car and the Motor Expo will help boost sales next quarter, it is hoped.