KTC expects cuts to be reflected in bottom line
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Krungthai Card is sure it will see its bottom line turn positive this quarter after its cost-cutting programme started paying dividends.
“We can say our revenue in the first quarter exceeded the target, but we still witnessed a loss because we had to set loan loss provisions for the flood. But we can control the loan loss provisions, which will ensure that KTC will not meet a loss in the second quarter,” CEO Rathien Srimongkol said last week.
The closing of 11 KTC Touch centres in the first quarter was part of the cost-cutting programme, while the credit-card-linked information-technology system from an outsourcing company was brought in-house, which gave KTC extra funds to spend on marketing campaigns to boost revenue.
Rathien declined to reveal the amount of cost savings.
The company might dissolve more Touch branches if they have few transactions, but it wants to ensure that the loss of the Touch branches will not inconvenience customers.
The results of cost-cutting helped to keep its loss in the first quarter from going higher than expected.
“We believe that if we’re not making a loss in the second quarter, that means we’re taking off to profit in the third and fourth quarters, and ROE [return on equity] will also improve,” he said.
KTC has to be profitable this year to make a positive ROE. It has set an ROE target of 15 per cent for next year. Currently its ROE is 3 per cent.
Apisak Tantivorawong, president of Krungthai Bank, has gone on record saying the bank’s subsidiary should produce an ROE of 14-17 per cent, the same as the bank.
Rathien expects KTC’s cost-to-income ratio to go down to 40 per cent by year-end from 46 per cent last year.
The increases in the entry-level salary to Bt15,000 and the minimum daily wage to Bt300 are good for the credit card and personal loan businesses, as card issuers can acquire new customers, he added.
Finansia Syrus Securities said in its research note that KTC would record a loss of Bt100 million in the first quarter after showing a huge loss of Bt1.7 billion in 2011 because flood-affected borrowers would become more visible after the flood relief scheme ends in June.
There is a good chance that KTC would raise capital to boost liquidity.
It would post a profit of Bt257 million for this whole year due to the cost-reduction programme and deferred taxes from last year, the brokerage said.
