After taking the lead in assets, KTB shifts aim
Bank seeks improved profitability by 2018
State-owned Krungthai Bank (KTB) has decided to focus on profit improvement after surpassing Bangkok Bank (BBL) as the country's largest lender by assets and deposits, a major milestone reached in the first quarter this year.
The bank aims to join the top ranks by nearly doubling its net profit to 60 billion baht in 2018, said president Vorapak Tanyawong.
Two-and-a-half years after he took the reins, KTB accomplished his target of knocking BBL off its asset perch. However, its bottom line still lags the other big three banks.
"Our profitability is fourth and that needs to be improved," he said in an interview with Bangkok Post. "Profit is the key performance metric."
During the January-to-March quarter, KTB's assets amounted to 2.89 trillion baht and deposits 2.2 trillion, while BBL's assets and deposits stood at 2.82 trillion and 2.06 trillion, respectively.
In terms of assets, Siam Commercial Bank (SCB) is now the country's third-largest bank and Kasikornbank (KBank) is fourth.
KTB posted first-quarter net profit of 7.93 billion baht, behind SCB at 13.2 billion, KBank at 12.4 billion and BBL at 9.41 billion. In 2014, KTB's net profit totalled 33.9 billion baht.
Mr Vorapak said the bank planned to step up its high-yield products, particularly for small and medium-sized enterprise (SME) and retail banking business, to boost its net profit.
KTB's SME and retail loans at the end of March expanded 5.78% and 3.83% from the end of last year as corporate, government and other loans fell 1.18%, 20% and 4.51%, respectively.
However, the bank decided to delay its entry into the auto refinancing business, given the high risk amid the fragile state of the economy and high household debt.
"As state infrastructure projects get underway, the bank plans to expand aggressively in SME and retail banking business. But we need to pump the brakes on auto refinancing with the economy struggling," he said.
Financial cost management is a key strategy to improve profitability. The bank wants to raise its Current Account Saving Account (CASA), a ratio of deposits in current and savings accounts to total deposits, from 50% to 70%, on par with its peers.
A high CASA ratio indicates a lower cost of funds.
Mr Vorapak said the bank's non-performing loans (NPLs) started to decline in May after climbing the first four months. KTB's stringent loan approvals and debt collection were credited for the drop.
The rise in NPLs had prompted the bank to set aside extra and normal provisions totalling 3.6 billion baht in April, fanning fears that commercial lenders' asset quality is deteriorating and they may need to put aside reserves, eroding their earnings.
KTB's gross NPLs surged by 10.56 billion baht or 18.38% to 68.05 billion at the end of March from the end of 2014. Its gross NPL ratio rose to 2.71% from 2.3% over the same period.
He said the bank would not need to set aside additional reserves for the remainder of this year if there were no unexpected situations.
KTB puts aside 700 million baht as reserves every month.
Mr Vorapak has also modernised the bank and its network, focusing on risk management and a human resources system to create fairness for employees and increasing efficiency.
- Krungthai Bank (KTB)