Kiatnakin Bank aims to lower cost of funds

KK’s first-quarter financial results showed that deposit-interest costs rose by 124 per cent against the same period in 2012. 

Apinant Klewpatinond, president and chairman of commercial banking business, said yesterday that KK acknowledged that its funding costs were the highest in the banking industry because KK pays its depositors 50 basis points more interest than larger banks. 

As a small bank, KK’s funding costs should be similar to other small and medium-size banks, he added. 

Even though KK had a net interest margin of 3.9 per cent in the first quarter thanks to high-yield loans such as hire-purchase (lease to own), which is its major portfolio, the duration gap between the flat rate of instalment loans and deposit interest rates is not reasonable at a time of so much competition for deposits.

Apinant said the bank therefore would not focus on lending growth as much as how to lower the cost of funds by bringing in more interest income from minimum loan rate (MLR) lending, and depending less on fixed-rate car loans.

The bank’s hire-purchase portfolio accounts for 72 per cent of total loans, loans to property developers 13 per cent, and those to small and medium-sized enterprises 11 per cent. Its MLR customers currently are SMEs and property developers. It is expanding its client base to corporates, especially medium-sized companies that might be the subsidiaries of larger firms.

Apinant explained that the merger with Phatra Capital was a benefit to KK in terms of reaching corporate customers. Through its investment-banking business, Phatra can refer customers to KK. 

The margin from corporate lending at 1.5-2 per cent is a satisfactory figure for KK, he said. 

The bank expects to begin lending to corporate customers in the second half of the year.

He said the bank would give more importance to current and saving accounts (CASA), especially for depositors upcountry. The deposits from its 50 provincial branches are smaller than the deposit base at its 37 branches in Bangkok.

The bank will still offer attractive returns to wealthy CASA depositors because more than half of its depositor base has accounts worth Bt10 million or more.  

As part of its cost management, the bank has proposed raising the outstanding debenture amount from Bt30 billion to Bt75 billion in preparing for long-term funding and to reinforce its capital. Shareholders on Thursday approved the proposal.

As at the end of March, KK had a BIS (capital adequacy) ratio of 14.62, of which 13.97 per cent was Tier 1 capital.