Political uncertainty has hit Bangkok Bank's mortgage-loan growth harder than expected, executive vice president Rachanee Nopmuang said yesterday.

"The impact of interest rate and oil price rises was in the bank's projections, but political problems are more serious than we anticipated. This has placed significant pressure on homebuyers and reduced their confidence," she said.

She added the bank had earlier made assumptions about the country's three core risk factors this year - interest rate hikes, oil price increases, as well as political turmoil. The bank was also quite confident about economic growth this year.

As a result, the bank last September set an ambitious 2006 housing-loan growth target of 25 per cent, or Bt20 billion.

However, net growth in the first five months was only Bt4 billion to Bt5 billion, an expansion of only 5 per cent.

With uncertainty in both the economic and political environments, the debt-servicing ability of Bangkok Bank's borrowers has declined. Some have requested an extension of their loan periods or other forms of debt restructuring.

Meanwhile, the bank's approval rate for housing loans - normally 75-80 per cent - has also dropped recently.

However, the bank is maintaining its 25-per-cent mortgage-loan growth target for the year, in the expectation that lending growth will improve in the second half. This is supported by an increased demand for loans in the second quarter, particularly in June.

Rachanee said the bank would in the second half launch a promotional campaign to encourage borrowers. This will focus on providing rewards rather than pricing since the latter strategy would affect the bank's funding costs in a rising interest-rate environment.

Shoke Na Ranong, Bangkok Bank's credit-card division manager, said such a campaign was an important strategy for business expansion in the current climate.

He said the bank had recorded about 70,000 new credit-card accounts in the first five months of the year, thanks to a promotion with a Honda Jazz as the first prize. It has launched a further Gold campaign aiming to boost its base by another 70,000 cards this year.

"Without promotional campaigns it's quite hard to expand the new-card base. Once our Gold promotion ends next month, the bank will launch further promotion programmes to achieve our target of 250,000 new cards [for the year]," he said.

Somruedi Banchongduang

The Nation