Bank-hire purchase operators post Q1 profit rises despite drop in lending
BANK PLAYERS in the hire-purchase (lease to own) business have reported year-on-year increases in net profit for the first quarter, thanks to an improvement in funding costs and better debt quality.
Their improved performance was achieved despite experiencing a slowdown in instalment lending during the period.
Tisco Financial Group, the holding company of Tisco Bank, reported a first-quarter net profit of Bt1.25 billion, against Bt1.19 billion in the same period last year. Its non-performing loans (NPLs) as of the end of March also improved – to 3.07 per cent, from 3.23 per cent at the close of last year.
Lower-than-expected domestic car sales pressured lending growth at Tisco, as auto loans account for 89.7 per cent of the group’s retail lending portfolio. Retail lending, meanwhile, represents 71.6 per cent of Tisco’s total loan portfolio.
For instalment loans, Tisco saw a year-on-year decline of 2.1 per cent to Bt149.66 billion during the first three months of the year, with lower auto sales affecting car inventory financing as well.
As of March 31, Tisco had outstanding loans of Bt233.16 billion, down 2.1 per cent from the end of last year.
Despite the improvement in its NPLs, Tisco has set aside extra provisioning of Bt520 million to increase its coverage ratio.
The institution’s coverage ratio stood at 89 per cent at the end of March, compared to 80 per cent at the end of December.
Tisco is attempting to bring its coverage ratio back to 100 per cent, after it fell below that level as a result of setting aside full provisioning for Sahaviriya Steel Industries last year.
LH Securities said in a research note yesterday that Tisco would face a challenge in expanding its lending, with the benefit gained from lower funding costs expected to decline and raising money from the capital market not an easy path to take.
Moreover, auto sales are likely to shrink more than previously expected, which would be a negative factor for loan expansion at Tisco, the securities house said, adding that if the group is unable to drive loans to offset the hire-purchase slowdown, and if its lending quality worsens, there will be pressure on setting a high provisioning level.
Kiatnakin Bank (KKP), another hire-purchase player in the banking sector, reported net earnings of Bt1.1 billion for the first quarter, up sharply from Bt664.09 million a year ago, while its NPLs improved slightly to 5.7 per cent from 5.8 per cent.
With lower NPLs, the bank has set aside lower provisioning as well, improving its coverage ratio to 97 per cent, compared with 92 per cent at the end of last year.
KKP reported a total loan portfolio of Bt175.71 billion at the end of the first quarter, down 1.2 per cent from the close of last year because of a 0.9-per-cent fall in auto lending and a drop of 3 per cent in SME loans, mainly among small and medium-sized property developers. The bank’s research team said that domestic car sales this year could fall below 760,000 units, representing a drop of more than 5 per cent from the 2015 level.
