Kasikornbank (KBank) has strengthened its infrastructure by upgrading its core banking and credit scoring systems, aimed at enhancing its business capabilities and improving asset quality management amid ongoing economic uncertainties.
According to chief executive Kattiya Indaravijaya, KBank upgraded its core banking system, bolstering its infrastructure and enhancing business capabilities. The upgrade incorporates advancements in big data and artificial intelligence (AI) that will help streamline operations and improve efficiency.
The bank also expanded the capacity of its digital banking services to accommodate increasing transaction volumes, said Ms Kattiya.
KBank, the country's third-largest lender by total assets, is an industry leader in digital banking services. Its mobile banking app K-Plus boasts 22.8 million users, with plans to increase the number to 23.9 million this year.
Financial transactions conducted via K-Plus account for 30% of the market share.
She said the upgrade also enhances the bank's data analytics capabilities, leading to smarter credit analysis, loan approvals and asset quality control.
The bank emphasises the importance of synergy between human expertise and technology, employing a checks-and-balances approach to improve efficiency, said Ms Kattiya.
"The synergy between people and technology allows us to better control asset quality, rather than relying solely on technology," she said.
Digital lending
KBank previously ventured into the lower-income segment, offering retail loans via a digital platform. However, this initiative faced higher levels of non-performing loans (NPLs), causing the bank to pause the project and revamp its digital loan services.
Ms Kattiya said the bank needs additional time to develop its technological infrastructure to effectively support digital banking services.
Efficient data analytics will require more time to accumulate sufficient and reliable data. KBank plans to resume offering these services once all systems and tools have been fully prepared, she said.
"Recently we discovered our previous, less comprehensive methods allowed some loan applicants to submit fake data to access funds, which contributed to an increase in the bank's bad debts," said Ms Kattiya.
"However, this was a pilot project and the financial impact was minimal."
In response to rising credit risk among certain customer segments given high household debt and the uneven economic recovery, the bank updated its credit scoring system across all financial segments.
The update aims to improve loan accessibility for qualified customers, while ensuring unqualified borrowers are declined.
The credit scoring adjustments are partly based on the Bank of Thailand's responsible lending practices and the bank's selective lending strategy, she said.
The bank acknowledges the credit scoring changes may impact loan access for new customers, said Ms Kattiya.
However, KBank plans to prioritise serving its existing clients over expanding its new customer base for the remainder of the year.
The bank also wants to emphasise selectivity as a key strategy, she said.
Customers who have maintained financial transactions with the bank for an extended period are more likely to qualify for loans under the updated data analytics.
"Given the tighter loan approval process amid heightened credit risks, a longer track record of a client's financial activities is essential for loan analysis. We require as much historical data as possible," said Ms Kattiya.
"If a client has maintained financial transactions with the bank for 10 years, we would analyse their data over that entire period."
In addition, the issue of artificial transactions made by loan applicants is another factor driving the bank's need for longer and more in-depth data analysis, she said.
Vulnerable clients
Amid the uneven recovery of the Thai economy and the country's elevated household debt, KBank extended financial assistance to vulnerable clients, particularly individuals and small and medium-sized enterprises (SMEs).
However, Ms Kattiya said the bank's SME loan portfolio has continued to shrink, reflecting reduced loan accessibility and lower debt-servicing capabilities within this customer segment.
Outstanding SME loans make up 27% of the bank's total loan portfolio, down from 33% prior to the pandemic. In contrast, corporate loans have increased to around 39% from 30%.
KBank is committed to assisting customers under the government's recent "You Fight, We Help" debt relief scheme, which covers mortgages, auto loans and SME loans, she said.
However, the bank expects an insignificant number of mortgage and auto loan borrowers to participate in the scheme because of the smaller size of these loan portfolios compared with other banks.
"For this year, we expect to manage NPLs better than last year, partly due to our selective loan growth strategy," said Ms Kattiya.
Given this strategy, KBank predicts marginal loan growth in 2025, with a focus on lowering credit costs and reducing the NPL ratio compared with 2024.
The bank set its 2024 credit cost range at 175-195 basis points, while the financial ratio was 190 basis points in the first nine months of last year.
She said the bank finalised its financial targets for 2025, but is awaiting board approval before officially announcing the figures.
Improving Profitability
According to its three-year business plan for 2025-2027, KBank aims to increase its return on equity (ROE) to double digits by 2026, up from 9.47% currently.
One key strategy to improve this ratio is reducing credit costs, said Ms Kattiya.
The bank aims to normalise its credit costs this year and plans to continue lowering the financial ratio over the next three years.
"The target of a double-digit ROE reflects the bank's strong capital base, positioning us to weather any uncertainties and build confidence among all stakeholders," she said.
Given concerns about the significant profits of the local banking sector amid the country's elevated household debt, Ms Kattiya said such criticism is understandable when comparing the banking sector's profits to those of other industries.
"However, several financial ratios of local banks are weaker than those of international banks, including ROE," she said.
"On average, regional peers have a double-digit ROE of 15-18%."