Personal Loans, Remainder of 2012: To Grow Markedly with Bank Customer Expansion (Business Brief No. 3287 Full Ed.)

Personal loans in 1Q12 rose steadily by 13.6 percent YoY, to THB216.805 billion. The increase came mainly from commercial bank extension which grew 21.2 percent YoY. Meanwhile, the data of non-bank providers recorded growth of 6.7 percent YoY, down 0.9 percent from the end of 2011. As for customer accounts, new personal loan customers at commercial banks also increased 11.9 percent YoY, while data on non-bank lenders showed a decline of 0.2 percent from the end of 2011. This reflected higher bank competitiveness and proactive retail loan business strategies along with ability to maintain asset quality of commercial banks further from the end of 2011. Overall, NPLs in 1Q12 stood at 2.8 percent, comprising 2.8 percent at commercial banks and 2.9 percent at non-bank lenders, compared to 2.7 percent at the 2011 year-end.

Broadly speaking, the personal loan business in 2012 is expected to witness continued growth of 11.0-16.0 percent, with a THB237-248 billion outstanding balance, against the growth of 13.7 percent achieved in 2011. This improvement, albeit versus a high base in 2011 boosted largely by eased loan criteria for flood-affected borrowers, can be attributed to expanded retail loan extension at commercial banks, particularly with lower income requirements. In addition, the government's measures aimed at raising incomes of middle and lower class citizens via salary and wage increases have made personal loans in the banking system more accessible to general public, possibly at the expense of non-bank providers. We at KResearch estimate that the outstanding personal loans at commercial banks may grow nearly two-fold over that of non-bank lenders by the 2012 year-end.