UOB Thai (UOBT) has kept its loan target at 2-3 times the GDP growth rate in spite of increasing non-performing loans (NPLs), says president and chief executive Choon Hin Tan.
The bank, which sustained a 40% rise in NPLs from 2015 to 2016, will move forward with its plan to expand close to 9% in Thailand.
Mr Tan said UOBT has kept one of the lowest NPL ratios in the Thai financial industry, but has not been immune to the increase in delinquent loans precipitated by the slow economic recovery. Between 2015 and 2016, its total loans rose 9.6%. The bank reported 4% loan growth in the first six months of this year.
At the end of 2016, UOBT's gross NPL ratio stood at 2.57%, up from 1.93% in 2015.
The bank reported a 1.02% net NPL ratio at the end of the second quarter and a 2.57% gross ratio (including restructured NPLs).
In the second quarter, KTB reported a gross NPL ratio of 4.33%, while Kasikorn Bank registered a gross NPL ratio of 3.22%.
The Bank of Thailand said the average NPL ratio for commercial banks at the end of June stood at 2.94%, up 0.1 percentage points from the first quarter.
TMB Analytics estimates the NPL ratio will peak at 3% in the third quarter, up close to 0.5 percentage points from the second quarter. Loans are projected to grow at 5% this year and to accelerate to 5.7% by 2018, mainly driven by demand from large enterprises, Naris Sathapholdeja, senior vice-president of TMB, said earlier.
"The rise in delinquent loans has not affected our profitability," said Mr Tan.
Profits for the first half of the year dropped 11% year-on-year, according to its second quarter report.
UOBT, which currently controls 3% of the Thai market, said its loans will continue growing at two to three times the GDP growth rate. "You may not have seen us making active acquisitions in the past few years, but we assure you we are growing at 2.5 times the market rate. We keep a low profile," says Mr Tan.
The bank has expanded its investments in digital services. "We partnered with equity crowdfunding platform OurCrowd, which will allow us to build an ecosystem that supports startups. Organically we upgraded our internet platform and our global banking platform."
UOB already operates QR code payments in Singapore via UOB Mighty and is implementing the system in Thailand sometime this year. This month the bank launched its version of the QR code payment system in collaboration with Alipay and WeChat. SCB is expected to launch an equivalent app in November.
"We are already on the digital banking bandwagon. I terms of contactless payments we are not lagging behind the others," said Mr Tan.
Competition in the banking industry is forecast to get even more competitive over the next few years. Banks are more prepared now than they were five years ago to compete against new entrants, he said.
