Tisco Bank is projecting an increase in non-performing loans (NPLs) this year as it shifts focus towards high-yield loans to boost returns.
Chief financial officer Chatri Chandrangam stated that the bank expects NPLs to rise due to heightened emphasis on high-yield loans, particularly in the car title loan segment.
The bank’s subsidiary, Hi-Way Co, operates the auto cash service under the Somwang brand.
Tisco Financial Group, the bank’s holding company, disclosed to the Stock Exchange of Thailand that the NPL ratio for the first quarter of 2024 climbed to 2.27%, up from 2.13% compared to the previous year.
Chatri mentioned that aligned with their high-yield loan strategy, they aim for the NPL ratio to hit 2.5% in 2024, a level they consider manageable for improved returns.
Although loan yields rose to 7.63% in Q1 2024 from 7.24% a year earlier, the bank recorded a 3.3% decrease in net profit to 1.73 billion baht, attributed to reduced non-interest income and higher expected credit losses.
CEO Sakchai Peechapat highlighted the bank’s plans to expand their car title loan business under the Somwang brand to cater to growing demand, with projected branch numbers increasing to 1,000-1,200 branches by the end of the year.
Tisco, recognized for expertise in hire-purchase and auto loan businesses, holds hire-purchase loans worth 105 billion baht out of a total portfolio of 235 billion baht, while car title loans stand at 41.9 billion baht as of March.
Sakchai emphasized their commitment to selective and sustainable auto loan growth aligned with the Thai economic recovery, automotive industry trends, and household debt dynamics.
In response to surging interest in electric vehicles (EVs), Tisco plans to allocate more resources to EV loans, with the EV loan penetration rate surging to 20% in Q1 2024 from 12% the previous year.
Sakchai expressed confidence that a proposed policy rate cut by the Bank of Thailand in the latter half of 2024, along with steady policies, will fortify the auto loan sector and bolster car buyers’ debt repayment capability.
