Even though small and medium-sized enterprise (SME) loans have the highest failure rate for Kasikornbank (KBank), the bank will continue to focus on the segment because it offers a higher yield than other types of loans.
The country's largest SME lender aims for 4-6% growth this year from an SME loan portfolio that reached 512 billion baht last year, said president Kattiya Indaravijaya.
Last year KBank's soured SME loans accounted for 5.1% of the segment's portfolio, well above 1.5% for corporate loans, over 3% of retail loans and 3.3% of the bank's total loans.
In terms of return, SME loans generate the highest return on capital at around 50-60%, compared with 10% of corporate loans and 40% of retail loans.
"The bank is ready to set aside additional provisions for loan losses in line with the economic situation, loan expansion and asset quality to raise its coverage ratio to 135-140% this year from 130.9% last year," she said.
KBank increased its credit cost target for this year to 200-225 basis points from 210 basis points last year in line with the economic environment. It predicted the country's GDP in 2017 would grow 3.3%, unchanged from last year.
The bank aims to control its gross non-performing loan ratio this year at 3.3-3.4% and net interest margin at 3.3-3.5%.
KBank, the country's fourth-largest commercial bank by assets, has prepared liquidity to support loan expansion this year, and deposits are projected to remain the bank's key funding source with reasonable costs.
As other banks have set higher loan growth targets this year, KBank does not plan to intensify competition in mobilising deposits as there is still ample liquidity in the financial system, said Ms Kattiya.
KBank also does not plan to raise funds in overseas market, she said. The bank can support clients' requirements if there is demand for foreign-denominated funding, said Ms Kattiya.
Typically, demand in foreign currency happens when customers borrow from banks to fund their acquisition deals abroad.
Shares of KBANK closed yesterday on the Stock Exchange of Thailand at 197.50 baht, an increase of 2.50 baht, in trade worth 444 million baht.