KTC braces for low net this quarter, better figures later in Q3

KTC has terminated contracts to business-process-outsourcing companies to improve its cost-to-income ratio. That created compensation expenses and pressured profitability, chief executive officer Rathien Srimongkol said yesterday.
The company suffered net losses from higher loan loss provisions in the last two quarters.
KTC has estimated that its cost-to-income ratio this year must be brought down to 40 per cent from 46 per cent to generate a net profit. The ratio in the second quarter could not be reduced significantly but should be sharply down in the third quarter.
The credit-card company has gone from 17 outsourcing firms to two to five firms that are used for unskilled jobs.
The compensation payments will end next month. Without these payments, net profit in the third quarter should be higher than in the second quarter and could be the highest quarterly profit for KTC.
Although the fourth quarter is the peak season for the credit-card business, the company also has costs such as a budget for promotions and premiums to be paid to global card operators such as Visa and MasterCard.
The expected turnaround starting this quarter reflects efficiency in debt collection by the company itself, higher spending of cardholders and the cancellation of inactive cards.
To reduce the number of inactive cards, KTC will charge Bt500 for a third card; however, some cardholders prefer to pay the fee, since they remain satisfied with the benefits.
Customers usually hold one or two KTC cards including co-branded cards. Of the total of 1.6 million cards outstanding, 1.2 million are active.
The Forever Rewards loyalty scheme is the key strategy for KTC to maintain its cardholder base and boost the number of active spenders.
Charges on KTC cards year-to-date are up 8-10 per cent, which is in line with the target this year of 10-per-cent growth from Bt120 billion last year.