News Column

Credit card cash advances rising

June 12, 2014

By Somruedi Banchongduang, Bangkok Post, Thailand

June 12--Cash advances via credit cards have grown 10% over the first five months of the year as more people are suffering from a liquidity crunch. The slowing economy has prompted credit card companies to be more prudent in their asset quality control, says the credit card service provider Krungthai Card (KTC).

Pittaya Vorapanyasakul, executive vice-president for the credit card business of KTC, said the figure is a concern.

KTC's outstanding cash advances were 7.5 billion baht, some 15% of total KTC credit card spending for the first five months. The figure was 14% in the same period last year.

Mrs Pittaya said the company is paying more attention to debt collection to control asset quality.

Cash advances are largely sought by the mass market segment earning between 15,000 to 40,000 baht per month, the bulk of KTC's customer base of 1.63 million credit card holders.

"With strong debt collection practices, we expect to control loan quality, although rising cash advances are in line with the economic circumstances," she said.

The local card issuer also paid more attention to new card approvals, but kept its existing criteria unchanged. KTC offers credit lines for new cards five times lower than the central bank's regulations for monthly income during tough economic times.

Mrs Pittaya said its loan approval ratio is 50%, unchanged from last year.

KTC's delinquency rate increased a bit to 2.6% of total debt outstanding from 2.5% at the end of last year because of the slumping economy, while non-performing credit card loans (NPLs) were stable at 2.2%.

It booked card spending for the first five months of only 51 billion baht, or 5% below its full-year target of 138 billion baht.

Lower spending reflects the political turmoil weakening domestic purchasing power and sentiment.

However, KTC maintained its aggressive growth target of spending via credit cards at 10-15% this year compared with sluggish growth of 4-5% the previous year, as it is optimistic on the improving trend of domestic consumption in the second half because of promises made by the National Council for Peace and Order that the country will have functioning government in October.

"A stable political situation and clearer economic picture helps build confidence. Hopefully, consumption in the second half will improve. Seasonal spending and the company's marketing campaigns should help to encourage card payments in the second half," she said.

KTC, a subsidiary of Krungthai Bank, projects issuing 400,000 new cards this year, with 110,000 cards already issued. It launched a tourist marketing campaign called KTC Fine Selection yesterday, offering special prices for restaurants, hotels and spas with KTC payment.


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Source: Bangkok Post (Thailand)

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