The Bank of Thailand's decision to shave two points off the maximum interest rate for credit cards will cost Krungthai Card (KTC) an estimated 700 million baht a year in interest-derived income or 3% of its revenue, the company's president Rathian Srimongkol said yesterday.
The central bank tightened controls on credit cards in late July to put a lid on household debt and rising bad loans. One of the rules, due to take effect on Sept 1, cut the highest rate on credit cards from 20% to 18%. The new rate will apply to new and existing cardholders.
Despite this, the Krungthai Bank affiliate is maintaining its 10% target for full-year net profit growth. It said the BOT's tightening of regulations for unsecured loans is expected to depress the company's earnings from next year.
New cardholders who earn 15,000 baht to just below 30,000 baht a month will have their credit line capped at 1.5 times their monthly income per card. The cap is set at three times income for those who earn 30,000 bath to under 50,000 baht, and five times for those with monthly salaries of 50,000 baht or higher.
In the case of an emergency, cardholders will still be able to request a temporary increase in their credit line depending on income.
Those who earn under 30,000 baht a month will be limited to three personal loan creditors but there is no such restriction for higher wage earners.
Bracing for the challenge, KTC must adjust its business strategies and launch new ones in the second half, Mr Rathian said.
"We're searching for new business areas in generating revenue," he said. "Organic, inorganic, frontier and the digital platform will have opportunities to strengthen income. We will do a lot of things."
The central bank's tougher regulations will improve KTC's asset quality, he said, adding the company expects to lower its quarterly provision burden for loan losses. The provision now stands at 8.3% of each loan portfolio.
As of June the company's non-performing loans (NPLs) accounted for 1.57% of outstanding loans. The corresponding rates were 1.22% for credit cards and 1.22% for personal loans, far below the industry standard 3% per loan product.
Mr Rathian said KTC expects to see credit card spending dip below the current growth target of 15% this year.
He said the company saw spending on its cards climb 6.8% in the first six months from the end of 2016, beating the broader industry trend of 2.7% growth.
KTC shares closed yesterday on the Stock Exchange of Thailand at 104.50 baht, up 50 satang, in trade worth 80.3 million baht.
