Heng Leasing and Capital Plc expects to maintain its maximum interest rate through next year even as the central bank raises rates because of the company's loan portfolio adjustment.
The company charges a maximum rate of 22-23% per year for car title loans, while the ceiling rate is 24% according to the Bank of Thailand's regulations on personal loans.
Heng is keeping its maximum interest rate at the same level for both this year and next as it can manage the cost of funds through loan portfolio diversification, said chief executive Wichai Suphasathitkul.
He said the company's financial costs are rising in line with the Bank of Thailand's policy rate hikes.
The Bank of Thailand's Monetary Policy Committee is expected to raise its policy rate further as part of its monetary policy normalisation to curb inflation.
The central bank has increased its policy rate six times since August 2022, rising from 0.5% to 2%.
"Given loan portfolio diversification, we expect to maintain positive interest income and have no need to raise interest rates despite the higher cost of funds," Mr Wichai said.
Heng has been expanding its car title loan portfolio and reducing its auto hire-purchase loan portfolio to generate a better yield and higher income, he said.
Auto hire-purchase lending is supervised by the Office of the Consumer Protection Board, with a ceiling rate set at 15%, compared with 24% for car title loans.
For the first quarter of 2023, the company's car title loan portfolio increased to 46.5% of total loans outstanding, up from 17% in 2021.
Heng expects its car title loan portfolio to increase to 65% of the total by year-end.
The company's overall yield on loans increased from 16.9% in 2021 to 17.6% in 2022 and 18.1% in the first quarter of this year, Mr Wichai said.
He said even with an ambitious loan growth target, the company plans to cut its non-performing loan ratio to 2.9% by the end of this year, down from 3.1% in the first quarter of this year and 3.0% in 2022, through long-term debt restructuring measures as prescribed by the central bank.
Rising interest rates would affect loan demand in some customer segments, but there is more room to grow in auto loans, said Mr Wichai.
New branch openings will be a key strategy to expand the company's business this year, he said.
Heng has opened 96 branches this year and plans to open 22 more in the second half.
Mr Wichai said the company aims to increase total outstanding loans by 20-30% this year, from 12 billion baht at the end of 2022.
