KTB targets higher non-interest income
Krungthai Bank has set up two new divisions - global markets and transactional banking - to help bring in more non-interest income and increase its market share among private clients.
The bank does not foresee much growth in lending to corporate clients as this sector seeks other funding sources and is more interested in the risk-management services of the financial institutions, KTB president Vorapak Tanyawong said.
Under its seven-year plan (2015-2021), the bank aims to become a top-tier earner in the sector within three years with net profit of Bt60 billion.
To achieve that goal, it will have to boost lending to small and medium-sized enterprises and retail customers, as both sectors provide higher yields than corporate loans. Corporate banking should generate fee income instead, and that is why the bank established the two new divisions effective January 1.
Before setting up the global markets division, KTB offered the treasury and foreign-exchange products of foreign banks.
Vorapak said the bank would have to change the way it offers products from defensive to proactive so it can match an investor’s exposure with his capacity for risk.
Vorapak believes the transactional banking division will help reduce the cost of funds for the bank, and bring back customers who had moved from KTB to other banks.
“Many corporates use KTB as their main bank but manage their payrolls through other banks. When we start focusing on transactional banking, they should return to KTB with their payroll accounts. We believe that with this strategy, our market share among private clients will gradually expand,” he said.
However, even as the bank focuses more on private clients, it will continue to finance state borrowing if it has excess liquidity.
Loans to government agencies account for 10 per cent of KTB’s total portfolio.
Vorapak said the bank should be able to achieve its profitability targets. Back in 2012, it posted profit of Bt20 billion, which increased to Bt34 billion in 2013, and there should be no decline in 2014.
The bank has maintained its policy of a loan-growth target of 1.5 times that of gross domestic product.
KTB hopes its lending to SMEs in 2015 will grow at a similar rate to Kasikornbank, the market leader in the SME sector.
“In terms of total loan portfolio, we still be behind them [KBank], but we will beat them in terms of net new loans after our complete transformation and the focus on small and medium-sized enterprises,” he said.
However, growth in net new loans in the retail sector might require some time to close the gap between KTB and Siam Commercial Bank.
