One of Asia’s top bank stocks fears risky lending in Thailand

A man reading a newspaper sits in front of an electronic stock board at the Asia Plus Securities Pcl headquarters in Bangkok, Thailand. (Bloomberg pic)

BANGKOK: Tisco Financial Group Pcl, Thailand’s top performing bank stock this year, is becoming wary of risky lending practices as the Southeast Asian nation’s economy slows.

The bank is focused on asset quality and may fail to achieve its 2019 loan growth target of 5% amid intense competition in the car credit sector and central bank mortgage curbs, Chief Executive Officer Suthas Ruangmanamongkol said.

“The competition in retail lending is unreasonable and risky, with firms offering zero down-payment and low-rate loans,” Suthas said in an interview in Bangkok on Monday. “Asset size and loan growth is not our priority. We’re trying to prevent risky lending that could cause major problems.”

The Bank of Thailand has repeatedly flagged concerns about financial stability following an extended period of low borrowing costs and is expected to refrain from cutting rates on Wednesday despite a marked economic slowdown.

Lenders will tighten standards as the challenging outlook puts the spotlight on asset quality, according to a report from the monetary authority.

“Thai banks are likely to struggle to achieve even tapered-down loan growth targets for the year, unless they bring down their credit underwriting standards,” said Diksha Gera, a senior industry analyst at Bloomberg Intelligence. “The consumer-lending proportion of bank credit in Thailand has risen substantially since 2011, pushing up consumer leverage and posing asset quality risks.”

Southeast Asia’s second-largest economy expanded at the weakest pace since 2014 in the first quarter as exports, tourism and investment moderated.

Tisco Financial’s total return of about 32% in the past six months is one of the best in Asia among the region’s larger banks, data compiled by Bloomberg shows.

A dividend yield of roughly 8% is one of the reasons why investors have turned to the stock, according to broker KT Zmico Securities Co.