Krungthai Bank (KTB) plans to exploit the central bank's easing of loan-loss provisions under Thai Financial Reporting Standards 9 (TFRS 9), which enables banks to set aside reserves of 1% for new loans over the course of three years, starting from 2020.
Kasikornbank (KBank), however, affirmed its intention to maintain existing loan-loss practices for general loans.
KTB plans on complying with the Bank of Thailand's loan-loss provisioning principles and maintain its non-performing loan (NPL) coverage ratio at 120-130%, said president Payong Srivanich.
The bank stands ready to set aside provisions for credit losses in line with the new accounting report standards, he said.
According to the central bank's announcement, financial institutions are required to set aside loan-loss provisions of at least 0.33% of new loans in 2020, rising to 0.67% in 2021 and 1% from 2022.
At present, all financial institutions must set aside general provisions for loan losses at 1% for new loans.
Mr Payong is upbeat that the bank's NPLs will decrease because new loans next year will have higher quality.
Most of KTB's small and medium- sized enterprise (SME) customers are engaged in agriculture, unlike peers that have SME clients which are exporters, battered by trade tension between the US and China and the global economic doldrums.
Moreover, a lack of credit card and auto loans in the bank's lending portfolio will also help NPLs improve, Mr Payong said.
The country's fourth-largest lender by assets aims for NPLs outstanding of less than 100 billion baht this year.
Mr Payong said the bank's business plan for 2020 is seeking board approval.
KTB loans are expected to grow by 3% in 2020 as uncertainty remains high, while this year's loan growth will fall short of the 5% target, he said.
The bank has no plans to acquire overseas banks or enlarge its overseas network, as it wants to focus on Cambodia, Laos, Myanmar and Vietnam.
KTB is considering shutting down its branch in Los Angeles and plans to close 50-70 local branches in provincial areas next year, Mr Payong said.
Despite the planned branch shutdown, KTB doesn't expect layoffs -- though 30% of workers will probably leave based on the normal turnover rate over 4-5 years, he said.
Kattiya Indaravijaya, co-president of KBank, said the lender will continue to set aside reserves of 1% of new loans.
With its solid buffer, the bank does not need to change anything on doubtful allowance, she said, and the current provisions exceed the regulator's requirement.