GSB launches into auto credit
Bank sets up business with Srisawad Corp
Mr. Vitai, center, and Ms. Thida, second from left, promote the company Fast Money, which aims to reduce the interest rate on car loans.
The Government Savings Bank (GSB) has established a joint venture with a subsidiary of SET-listed Srisawad Corporation Plc for its foray into the auto securities lending industry.
GSB owns a 49% stake in Fast Money Co Ltd, a 100% subsidiary of Srisawad Corporation. The stake is valued at 1.5 billion baht.
The price per share received by GSB is about 15% below fair market value, said GSB chief executive and chairman Vitai Ratanakorn.
The joint venture aims to expand its customer base by one million people in the first year of the partnership, with a plan to list the company on the Thailand Stock Exchange within the next three years, Vitai said.
He said the primary goal of GSB’s foray into the vehicle securities lending industry is to help reduce market interest in this lending segment from 24% to 18% per year.
When the interest rate on auto loans goes down, it is believed that it could lower the interest rates charged on other categories of loan products as a result, Vitai said.
About 3 million customers use the services of auto title lending companies, while those who have been turned down for loans by financial institutions are around 3.1 million, he said.
“This joint venture will be a boon to existing customers and new customers,” said Mr. Vitai.
The joint venture is in line with the bank’s strategic direction of becoming a social bank by reducing the interest on auto title loans through market forces.
Net Interest Margin (NIM), a measure comparing the net interest income that a financial firm generates from loan products with the outgoing interest it pays to holders of savings accounts and certificates of deposit , for auto title loans, on average 15 to 20%.
This rate is much higher than the NIM of public banks and commercial banks, at 2.5% and 3-3.5%, respectively.
The car securities lending business is worth 110 billion baht, with non-performing loans (NPLs) accounting for 2.6% of total loans outstanding, according to data from the National Credit Bureau.
For Fast Money, the NPL ratio is 1-2% of total outstanding loans and the amount of auto securities loans in its portfolio is valued at 8 billion baht.
The company has 500,000 customers and a market share of 10 to 15%.
Last year’s profit was recorded at 600 million baht.
Thida Kaewbootta, strategist at Srisawad Corporation, said the joint venture would help expand the company’s customer base through GSB’s 1,060 branches.