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CIMBT says IFRS 9 to hit mortgages

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Mortgage lenders' appetite is expected to be whittled down when International Financial Reporting Standard 9 (IFRS 9) is adopted as the new accounting rule, requiring them to set aside higher loan-loss provisions based on lifetime expected credit losses.

Housing loan approval is likely to decline sharply in response, said Adisorn Sermchaiwong, senior executive vice-president of CIMB Thai Bank (CIMBT).

Housing lenders would then lower loan-to-value ratio, the comparative size of a loan to the value of the property securing the loan, by demanding a higher down payment from homebuyers, he said.

The higher burden for potential homeowners would make it more difficult to access loans, Mr Adisorn said.

"The down payment for mortgages could rise to 20-30% of home prices from 5-10%," he said.

IFRS 9 could make the lending industry focus more on lower-risk assets such as corporate loans, Mr Adisorn said.

On Friday, a subcommittee assigned by the Oversight Committee on Accounting Professions (Ocap) proposed delaying IFRS 9, scheduled to begin next January, for another year to prevent harm to small and medium-sized enterprises. The proposal will be forwarded to the Ocap meeting next month.

Although IFRS 9 would strengthen the finances of the banking industry, it should be gradually adopted so customers can adjust, Mr Adisorn said.

CIMBT, 94.1% owned by Malaysia-based CIMB Group, has prepared to comply with the new standard in several areas, including loan-loss provisions, infrastructure and product development.

The parent firm adopted IFRS 9 at the beginning of the year.

Mr Adisorn said the bank extended new mortgages worth about 4 billion baht during the January-to-March quarter and aims to add 5 billion in new housing loans this quarter.

The bank targets new housing loans worth 18 billion baht this year, up from 14 billion last year. Its mortgage portfolio is also expected to increase to 75 billion baht by the end of the year from 70 billion.

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