Krungsri’s card charge: Loan surge despite economic strain

The unsecured loan arm of Bank of Ayudhya, Krungsri Consumer, is predicting a spike in credit card loans in the second half of the year, despite the economy limping along and new rules raising the minimum payments.

Currently, Krungsri’s non-performing loan (NPL) rate is a lowly 1.4%, far better than the industry average of 2.9%. Atis Ruchirawat, head honcho at Krungsri Consumer Group, blames economic woes and new regulations for the dip in loan quality.

Earlier this year, the Bank of Thailand slapped a higher minimum payment requirement on credit cards, bumping it from 5% to 8% of the total balance. While cardholders felt the pinch at first, things have now calmed down, said Atis.

“We observed a rising trend in credit card NPLs starting from the second half of this year, and this is expected to continue until the end of the year. However, we anticipate the situation will remain manageable.”

Atis stated that the company has been cautious in approving both credit cards and personal loans, aiming to align clients’ credit risk profiles with the economic environment. The approval rates for credit cards and personal loans are approximately 40% and 30%, respectively, a slight decrease from last year.

Despite these challenges, Krungsri Consumer remains optimistic about achieving its business targets for the upcoming year, especially after a strong performance in the first half. The company acquired 287,000 new customer accounts in the first half, with a full-year target of 617,000 accounts, representing a 10% growth from the previous year.

Personal loan portfolio

This increase in accounts contributed to credit card spending reaching 189 billion baht, nearly half of the full-year target of 393 billion baht, which is an 8% increase from the previous year. Additionally, Krungsri Consumer expanded its new personal loan portfolio by 47 billion baht in the first half, up 6% year-on-year, targeting 100 billion baht for the year, a 9% gain from the previous year.

The total outstanding unsecured loan portfolio grew to 140 billion baht in the first half, a 2% year-on-year increase. The full-year target is set at 151 billion baht, 2% higher than last year.

According to Atis, the company has adjusted its business strategy to align with the economic environment over the next 12 months, focusing on three core areas: credit cards, personal loans, and instalment loans. The aim is to maintain a leading position in these segments through sustainable long-term growth, reported Bangkok Post.

In addition, Krungsri Consumer is positioning itself as a payment facilitator by developing innovative payment systems, such as biometric payments, to align with digital era trends. The company is collaborating with hypermarket Lotus’s to test facial recognition payments in a pilot project.