Krungthai Bank (KTB) says its planned IT investment budget of 12 billion baht next year will take a bite out of net profit in the short run but should set a path for the bank to generate new income sources to sustain profitability over the long term.
The investment will strengthen the bank's infrastructure for the digital age, said president Payong Srivanich.
The 12-billion-baht IT budget is the same as this year's.
Although the bank's prime lending rates -- minimum lending rate (MLR), minimum overdraft rate (MOR) and minimum retail rate (MRR) -- are a quarter percentage point lower than banking peers' to provide consumers better access to formal financial sources in compliance with government policy, KTB manages to deliver positive net returns.
Banks are investing heavily in IT systems and technology to gain a foothold in the digital banking platform and keep pace with changing customer behaviour.
KTB yesterday signed a memorandum of understanding with Thai Credit Guarantee Corporation (TCG) to support financial facilities for small and medium-sized enterprises (SMEs) under the government's Pracha Rat initiative.
Under the collaboration, KTB plans to offer 10 billion baht worth of total credit lines to SMEs with special rates, starting from 4-5.5% for the first two years and a floating rate based on MRR, depending on the borrower's risk profile, for the remaining loan term.
Mr Payong said the bank's SME loans to mid-sized businesses so far this year are up 5% from the end of 2017, but lending in some sectors is slowing, particularly for rice mills and related business.
The bank's total SME loans shrank during the nine months through September as loan approval to small businesses was tightened to control asset quality.
KTB's SME loan portfolio was 337.48 billion baht as of September, contracting 2.9% from the end of last year. The non-performing SME loan ratio was 5-6%, higher than that of any other loan segment.
State-owned TCG was approved by the cabinet in August to provide guarantees for 150 billion baht in loans this year, of which 8 billion baht was already provided, said chairman Surachai Danaitangtrakul.