Pickup truck loan defaults surge 39% in May, NCB reports

The National Credit Bureau (NCB) reported a significant 39% increase in bad debt for pickup truck loans in May, highlighting an alarming trend in the auto finance sector.

Banks have also seen a contraction in car loans during the first half of this year, corresponding with a nationwide decline in car sales. By May 2024, non-performing loans (NPLs) for pickup trucks had reached approximately 138 billion baht, marking a 39.1% year-on-year rise.

Troubled debt restructuring within the auto loan segment hit 24.1 billion baht, an increase of 16% from the same period the previous year, according to NCB’s credit records.

Loans classified as special mention, or those overdue by more than 60 days but not exceeding 90 days, for pickups stood at 137.7 billion baht—a 3.3% increase from the same time last year. Regular loans for pickups were around 753 billion baht, reflecting a 10.2% decline.

Surapol Opasatien, NCB’s chief executive, highlighted the critical role of pickup trucks as essential livelihood tools for many households across the country. Surapol emphasised the urgent need for solutions to household debt, particularly for loans tied to essential living tools.

“An urgent solution to household debt, particularly loans related to essential living tools, is therefore required.”

Leading banks in the auto loan sector, such as Kiatnakin Phatra (KKP), Tisco Bank, TMBThanachart Bank (TTB), and Bank of Ayudhya (Krungsri), reported contractions in their auto loan portfolios for both the second quarter and the first half of this year.

Loan portfolio

KKP’s hire-purchase outstanding loans were down to 176 billion baht in the second quarter, ending June 30, a decrease of 1.3% quarter-on-quarter and 5.7% year-on-year. Auto loans made up 44.9% of KKP’s total loan portfolio, which stood at 392 billion baht. This was in line with a 23.8% year-on-year drop in domestic new car sales for the first five months of this year, totalling 260,365 units.

Tisco Bank reported a total hire purchase loan portfolio of 103 billion baht for the same period, down 1.6% quarter-on-quarter and 3.6% year-to-date. Auto loans accounted for 44.1% of Tisco’s total outstanding loans, which totalled 233 billion baht.

According to a statement from TTB to the Stock Exchange of Thailand(SET), ongoing challenges in the car market, including customer demand and price volatility, resulted in a 3.3% quarter-on-quarter slowdown in their overall hire purchase portfolio for the second quarter and a 4.8% decline from the first half of last year.

This contraction affected both new and used car segments, aligning with TTB’s strategy to selectively grow a quality portfolio and tighten underwriting criteria. Auto loans represented 30% of TTB’s total outstanding loans.

Krungsri reported an auto loan portfolio of 415 billion baht in the second quarter, a 2% quarter-on-quarter and 3.4% year on year decline. The bank’s outstanding car loans made up 20.8% of Krungsri’s total loan portfolio.

The sharp contraction in domestic car sales, coupled with tighter credit conditions and the deteriorating debt-servicing capacity of auto-hire purchase customers, mirrored the overall trend of auto loan contraction observed by Krungsri.

These developments underscore the broader financial challenges faced by the auto loan sector, necessitating focused strategies to manage risk and support borrowers effectively, reported Bangkok Post.