SCB CIO recommends Wealth Lending Products to generate cash flow
SCB CIO is suggesting solutions to leverage financial assets and real estates into cash flow via Wealth Lending Products, including Property Backed Loan or Lombard Loan products with special interest rates to invest in a wide variety of assets. Under the supervision of the Bank’s investment advisory team in selecting products customized to fit toinvestors’ demands in terms of acceptable inherent risks, these loans are another technique to generate strong returns against inflation. These products have been well-received by HNWI clients, as evidenced by a 20% increase in investment in flow from the previous year and a growth target of at least 10 billion baht planned for this year.
Siam Commercial Bank Chief Investment Office Executive Vice President Sornchai Suneta noted that fund management channels can be executed through a wide array of assets with varying degrees of liquidity depending on economic climate at each juncture. Presently, investors holding financial assets and real estate have been adversely impacted by both domestic and international events, such as the stagnant economy resulting from pandemic. With inflation likely to climb and land and building taxes being implemented in full swing this year, the situation is going to deteriorate. Foreign influences have included geopolitical concerns and global stock market volatility over the past five months. As a result, high net worth investors are seeking to increase the liquidity of their assets in order to invest and generate returns when the opportunity arises, while diversifying risk with the goal of not selling assets held because doing so could forgo upside opportunity if the value of the assets appreciates in future.
Assets held by wealthy investors include land, real estate, and bonds, among other investment vehicles. Investors can choose to mortgage real estate with the Bank to take out Property Backed Loan and/or pledge securities or financial assets to take out Lombard Loans and the loan proceed can be used for investment to enhance investor’s wealth The bank typically offers investors loans with attractive annual interest rates ranging from 2.5% to 4%, depending on the loan term. In order to increase income-generating opportunities, under the close supervision of the Bank’s advisors loans received by investors will be invested through an Investment Portfolio in a broad spectrum of investment products of the Bank and its affiliates, such as SCB Securities, SCB Asset Management, and SCB Julius Baer. This approach will be superior to leaving land parcels as idle assets or holding securities whose value declines in response to market conditions. Even though investors will be required to pay interest and fees, there is still a chance for a high return on investments and portfolio growth. Therefore, these options provide another excellent means for investors to obtain investment capital. Wealth Lending Products are tools that assist in resolving the following issues:
Offsetting anticipated future increases in land and building taxes as undeveloped land will be subject to a tax rate that increases every three years in accordance with the ceiling rate structure. In addition, Land Department appraisal prices are anticipated to rise in the future, as the publication of new appraisal prices was delayed due to the pandemic. The last appraisal prices were issued for the years 2016-2019, with new appraisal prices expected to be released at the start of 2023. Due to the current state of the economy, investors must make plans to invest or utilize land to avoid incurring opportunity costs. As land taxes are levied annually, investors can apply for Property Backed Loans and use loans to generate returns, pay taxes, and lessen concerns regarding finding tenants, real estate project development, and land improvement without wasting opportunities if real estate values rise in the future, or sell for a profit when the opportunity presents itself. In addition, Property Backed Loans are flexible, allowing investors to return loans prior to maturity without prepayment penalty fee, except when refinancing with other banks.
Utilizing loans as hedging tools against inflation: Customers can use debentures whose value is likely to devalue due to growing inflation as collateral for Lombard Loans. Loan proceeds will be invested in assets that offer inflation-adjusted returns, such as certain types of Real Estate Investment Trusts (REITs), in order to improve earnings or mitigate the effects of investment portfolios during this period.
Utilizing loans as tools to develop liquidity and avoid missing out opportunistic investment. Due to turbulent market conditions, investors may not wish to sell negative-yielding debentures during this period in anticipation that the price of the securities will be re-adjusted in the future. However, they perceive chances to invest in other asset classes, such as private assets or derivative bonds, which generate attractive returns and can help boost returns or alleviate portfolio losses. Under the supervision of the investment advisory team, investors can pledge their securities against Lombard Loans with the bank in order to utilize the loans for investment purposes.
Sornchai also noted that Wealth Lending Products continue to be highly appreciated by wealthy investors. This year, the total amount of loans to create cash flow has climbed by nearly 20 percent compared to the previous year, with a growth target of at least 10 billion baht and a projected return of 7 to 8% per annum for medium-risk investment portfolios. In addition, our team of investment advisors is available to provide an extensive selection of investment options to investors interested in wealth lending solutions.
