The Bank of Thailand's tougher regulations on unsecured loans is affecting CIMB Thai Bank (CIMBT), as its monthly personal loan application ratio declined to 20% of total retail loans.
The bank's new monthly applications for unsecured loans fell from 30-40% of its total retail loans to 20%, with the biggest decline in applicants earning income below 30,000 baht, said Adisorn Sermchaiwong, senior executive vice-president.
The central bank tightened controls on unsecured loans to put a lid on household debt and rising bad loans. The tougher regulation went into effect on Sept 1, restricting those earning under 30,000 baht a month to three creditors.
There is no such limitation for higher-wage earners.
The rule is likely to cause CIMBT to miss its 10% growth target for this year, he said. The bank expects 7% growth in retail loans in 2017.
In addition to the new rule, Mr Adisorn blamed uneven economic growth for weak loan demand.
But the central bank's tougher regulations for unsecured loans came as a boon to the bank's asset quality.
CIMBT projects the bad loan ratio of its retail banking business will decline to 3.75% at the end of this year from 4.2% as of September.
The bank divested 1 billion baht worth of bad mortgages in the fourth quarter, helping to reduce its distressed loan ratio.
The divestment marked the first time the bank had sold bad retail assets because it had limited expertise in the area relative to asset management corporations, he said.
CIMBT has set an aggressive target on retail loan growth in the range of 20-25% next year and aims to keep its non-performing loan ratio at no more than 4%.
Better economic momentum and the bank's business strategy are forecast to help the bank achieve that target.
For retail loans, the bank in recent years has mainly focused on the upper income market segment or those with minimum income of 30,000 baht per month. Through that strategy, CIMBT has managed to grow its loan portfolio sustainably, improving asset quality.
In related news, the bank is collaborating with Spar, a convenience store located at Bangchak petrol stations, to operate its third mini-branch.
The bank currently runs two mini-branches located at 7-Eleven convenience stores.
CIMBT plans to relocate its full-service branches nationwide next year, as well as adopt to the mini-branch model, in line with changing consumer lifestyles.
"Although the mini-branch model opened at 7-Eleven outlets last year has not created significant business activity yet, more time is needed to make consumers familiar with the new model. We expect to spend three years doing that," said Mr Adisorn.
CIMBT has continued to close down full-service branches, which have dropped from 140 to 81 over the past three years.
