Thailand
Thailand: BBL raises income target for credit cards
Bangkok Bank (BBL) plans to increase its customer base in the upper-income segment for credit card loans next year to beef up risk management against rising bad loans and swelling household debt.
The bank aims to shift its focus to new credit card applicants with a monthly income of 25,000-30,000 baht next year, up from 20,000 baht on average, to hedge against higher non-performing loans (NPLs) and elevated household debt worsened by the economic downturn, said Shoke Na Ranong, executive vice-president and card division manager at BBL.
The NPL ratio for BBL’s credit cards has increased to around 2.6-2.7% of total outstanding loans, up from 2.1% at year-end 2019.
For the commercial bank industry, the NPL ratio logged 2.4% of total outstanding loans in the third quarter, down from 3% registered in the preceding quarter, according to Bank of Thailand data.
The decline was attributed banks’ debt relief measures to alleviate debtors’ plight amid the pandemic crisis.
Thailand’s household debt rose to 84% of GDP or 13.6 trillion baht in the second quarter, up from 80.3% of GDP or 13.5 trillion logged in the first quarter, according to central bank data.
There are around 35,000 credit cardholders who have applied for BBL’s debt relief measures under the Bank of Thailand’s debt relief programme. Around 70-75% can exit from the financial assistance programme in line with improved economic activities.
Some borrowers still have to remain under the debt relief programme, especially those who operate tourism-related businesses. BBL is offering financial assistance on a case-by-case basis.
“We offer credit cardholders, who cannot repay debts normally, several instruments, especially debt suspension for three months and cutting the interest rate to 12% per year from the central bank’s ceiling requirement of 16%,” said Mr Shoke.
Converting interest rates from short-term loans to long-term loans and prolonging loan maturity are other assistance measures devised by BBL.
Under the fragile economic recovery outlook for 2021, BBL will focus its attention mainly on customer assistance and asset quality rather than business expansion.
Initially the bank expected flat growth for credit card spending and an increase of 200,000 new credit cards in 2021, but the business plan has yet to be finalised.
At the beginning of the year, BBL increased new credit cards by around 180,000 cards and the full-year target is at 200,000 cards. The number is a downgrade from the initial target of 280,000 new credit cards.
Credit card spending has dropped by around 10-12%, especially in the spending category related to outbound tourism, despite improving from a 16% contraction seen during the lockdown in April and May, said Mr Shoke.
Source: https://www.bangkokpost.com/business/2024275/bbl-raises-income-target-for-credit-cards