Krung Thai Bank upbeat on loan target for the current year

The loan increase was mainly from corporate, housing and consumer loans, especially credit to state officials and state-enterprise employees, KTB's major customer base.

However, the bank saw its loans for small and medium enterprises slip lower than the target.

Next month, the bank is preparing Bt28 billion in loans to mega-projects.

KTB president Apisak Tantivorawong yesterday said the bank might revise its entire year loan target in the next six months.

"Government officials getting salary raises have caused our Tanawat loan [a consumer loan], which lends specially to officials and state enterprise employees, to grow significantly. The higher the salary, the higher credit lines they can afford. Besides, this type of loan has a low risk because customers' salaries are paid via the bank's accounts," Apisak said

For example, Apisak said, if a Tanawat-loan customer received a salary rise of Bt1,000, he would be eligible for an additional loan of Bt10,000. Right now, 70 per cent of state officials and state-enterprise employees are the bank's customers.

Most employees with low salary levels will apply for a loan with a higher credit line when they receive a raise.

Meanwhile, KTB will issue 10-year debentures worth Bt28 billion on June 3-5 to retail and institutional customers with two choices of return. Investors must subscribe at least Bt100,000 or a multiple of Bt100,000 and will receive a return every six months.

"There are two types of return," Apisak said. "A fixed interest rate offers 5 per cent in the first five years and 6.5 per cent in the last five. If investors choose a floating interest rate, the return is linked to the six-month fixed-saving interest rate. They will get the six-month fixed-saving interest rate plus 1.5 per cent in the first five years and plus 2.5 per cent in the last five. This is a good choice, because if the interest rate rises, the investors will also get a higher return."

The main reason for issuing the debenture is to substitute the bank's existing subordinated debts, which will expire in the beginning of next year. Besides, the bank needs to increase its tier-2 capital, which is 3.61 per cent right now, to become 6.49 per cent after the issue of the Bt28-billion debenture. The bank needs to prepare room for lending to mega-projects in the next few years.