Krungthai Bank (KTB) could be required to set aside higher loan-loss provisions to deal with a potential bad-loan uptick this year as the deteriorating debt-servicing ability of clients is further hit by the sagging economy.
The bank has implemented several financial assistance measures, including debt restructuring required by the Bank of Thailand, to keep customers afloat during this difficult period, and these aid measures could weaken the bank's asset quality, said Payong Srivanich, KTB's president.
KTB, the country's third-largest lender by assets, aims to maintain its gross non-performing loan (NPL) ratio this year at 4.3%, the same level as last year. The bank's loan-loss provision for bad debt was 28.3 billion baht in 2019.
"We acknowledge that the debt payment ability of customers has become weaker," Mr Payong said. "The bank needs to support and help customers survive this hardship. This assistance, in turn, could help the bank's loan loss reserves and NPLs."
With proactive debt restructuring measures, the bank is offering financial assistance to customers to help them weather the impact of the economic doldrums and the coronavirus outbreak.
These measures include a grace period for principal payments on debt, rescheduling payments and cutting interest rates on a case-by-case basis.
The bank is maintaining its GDP growth rate forecast at 2.8% and its own financial targets this year despite the mounting uncertainties, Mr Payong said.
In the event that KTB downgrades the country's 2020 economic outlook, the banks own business targets will not be revised, he said.
According to KTB's 2020 financial goals, the bank aims for lending to grow 3-5% and for net interest margin to remain steady at 3.07%.
Mr Payong said the government's fiscal 2020 budget will be approved soon and deliver a key engine to drive the country's economic expansion.
He said the central bank's plan to implement guidelines for fee charges across the board is unlikely to have a significant impact on KTB relative to other peers, as the bank does not operate a credit card business directly.
Tha bank's subsidiary, Krungthai Card, handles the credit card segment, and the bank's auto lending services have been suspended.
KTB's total revenue for 2019 amounted to 125.7 billion baht, of which 70% came from net interest income and the remaining 30% from net non-interest income.
The bank recorded non-interest income of 37.34 billion baht last year, of which 23.23 billion came from net fee income and the remaining 14.11 was net non-fee income.
KTB shares closed on Thursday on the Stock Exchange of Thailand at 16.10 baht, unchanged, in trade worth 208.2 million baht.