Fast-Growing Lender Srisawad Sees Opportunity in Sluggish Thai Economy

  • Consumer lender plans to open 400 local branches in 2016
  • Big banks have become stricter in approving loans: Director

Srisawad Power 1979 Pcl, Thailand’s biggest consumer lender, plans to open 400 branches and acquire loans from other banks this year as it sees the nation’s sluggish economy providing fertile ground for expansion.

The company, which doubled net income over the last three years by lending to lower-income Thais that struggle to get credit, aims to have 2,000 outlets by year-end, said Director Thida Kaewbootda. Credit growth of 20 percent is being targeted in 2016 and as much as 5 billion baht ($143 million) has been allocated to purchase car and housing loans from other lenders, she said.

“Most large banks have been less focused on small-sized individual borrowers with poor credit records, giving us vast business potential,” Thida said in an interview at her office in Bangkok late on Tuesday. "The current economic slowdown offers some opportunity as most commercial banks have become much stricter in approving loans.”

Prime Minister Prayuth Chan-Ocha has failed to spur economic expansion since taking over in a military coup in May 2014, with growth of 2.8 percent last year trailing 5 percent in Malaysia. Srisawad, whose share price has increased sixfold since it listed two years ago and is rated a buy by 9 of 13 analysts that cover it, is also looking to expand into neighboring Vietnam and Myanmar.

 “Overseas expansion will provide a complementary catalyst for the company’s business growth,” Thida said. Srisawad has a unit in Vietnam that isn’t active, but doesn’t have a specific timetable for opening offshore outlets, she said.

“Srisawad Power has the capability and resources to penetrate untapped consumer loan markets in neighboring countries,” said Natwarin Tripobsakul, a Bangkok-based analyst at AEC Securities Pcl, which rates the stock a buy. “Still, some investors are cautious whether exponential growth can be maintained following spectacular earnings.”

Bad-Loan Ratio

Srisawad reported net income of 1.34 billion baht last year, compared with 855 million baht in 2014 and 575 million baht in 2013. First-quarter profit probably jumped 48 percent to 412 million baht from a year earlier, Natwarin said, before the results due by mid-May.

The company’s share price has declined 8.4 percent this year through Wednesday, compared with a 9.6 percent gain in the benchmark SET Index, following a surge of 96 percent in 2015. Its market value of 44.2 billion baht makes it the largest company in the Stock Exchange of Thailand Finance and Securities Index. The stock declined 1 percent to close at 42.25 baht after being up as much as 1.9 percent earlier.

Srisawad offers loans to individuals with motorcycles, cars and houses as collateral. More than half of the company’s existing customers can’t get loans from banks because of their poor credit records, Thida said. By limiting financing to half the amount of the customers’ collateral, Srisawad has been able to keep its ratio of non-performing loans down to 3.5 percent, she said. That compares with 2 percent at Krungthai Card Pcl, a unit of Thailand’s third biggest bank.

"Srisawad’s bad loan level is quite steady and manageable” said AEC Securities’ Natwarin. “The high value of assets in backing up the loans helps protect them from a high default rate. The company’s risk management has proven effective.”

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