CIMB Thai Bank (CIMBT) is losing market share in mortgage refinancing as competition intensifies amid sluggish growth for new housing loans.
CIMBT's mortgage refinancing market share fell to around 16% from 20% last year after other banks shifted their focus from new home loans to refinance, said head of consumer banking Tanawan Chiaranant.
Given the slow growth of the Thai economy, a sluggish property market, and the recent earthquake in Bangkok, demand for new home loans declined, prompting banks to emphasise the refinance market.
"Mortgage refinance is a strategic business of CIMBT. Despite the decline in market share, our share of 16% is considered a satisfactory level amid tougher competition," said Ms Tanawan. "We expect to maintain this share for the rest of the year."
As of March this year, the bank's total mortgage portfolio tallied 125 billion baht, of which around 60% was refinanced home loans.
CIMBT wants to grow housing loans outstanding to 135 billion baht by year-end, with the refinanced loan portfolio accounting for 55-60%.
She said there is intense price competition in the mortgage refinancing market, with low interest rates of 2.5-2.7% depending on the risk profile of each loan applicant.
CIMBT offers an interest rate of 1.99% for the first year of a mortgage refinance loan, and an average rate of 3.84% per year throughout the loan term.
For new mortgages, Ms Tanawan said the bank primarily focuses on upper-income homebuyers whose monthly income is at least 50,000 baht, seeking houses with minimum prices of 5 million baht per unit.
Given the high purchasing power and debt repayment capabilities of this segment, the bank can control non-performing loans (NPLs) for mortgage products, she said. In the first quarter of this year, the bank's NPL ratio for mortgages was 3.52%.
CIMBT plans to keep the bad debt ratio at no more than 3.9% by year-end, even though risks have escalated.
The bank's mortgage portfolio of 125 billion baht in the first quarter this year represents growth of 4.9% year-on-year, attributed to loan analysis using a risk-based pricing approach. This innovative instrument allowed CIMBT to maintain an approval rate for housing loans of around 60% of total loan applicants, said Ms Tanawan.
If a customer's loan application is rejected, the bank recommends they adjust some requirements, such as looking for cheaper homes or extending the debt instalment maturity to increase their chances of a loan approval, she said.