Kiatnakin Phatra banking on the sum of its parts

Last year was not the best of years for KKP, with its new lending falling 3.4 per cent and non-performing loans (NPLs) climbing to 5.6 per cent, the highest level among its peers.
The high NPL figure was largely down to vehicle inventory losses, as half of its hire-purchase loan portfolio is accounted for by used cars.
Hire-purchase lending contributes 67 per cent of the group’s income.
Despite the NPL figure affecting its performance last year, hire purchase remains the focus for KKP, said Aphinant Klewpatinond, president and chairman of the group’s commercial banking business.
The group was formed via a merger between Kiatnakin Bank and Phatra Capital, companies involved in quite different types of business, he said, adding that the key to growth was how to add value from these businesses.
Under KPP’s five-year vision, the existing portfolio in its banking and capital businesses is in focus, but all elements of the group’s business should also be able to complement each other well, he stressed.
KKP has expertise in hire purchase and a high-net-worth client base, while Phatra has strength in the capital market and wealth management.
The group has a balance sheet supporting investment in the capital market, said Aphinant.
The group this year plans to introduce Lombard loans, a form of lending well-known in global banking and which involves collateralised credit backed by equities and bonds.
A Lombard loan is protected by individuals investing in high-return assets.
KKP will be the first bank in Thailand to introduce this type of lending, which confirms the group’s expertise in the high-net-worth customer segment, its chief said.
KKP manages assets worth Bt300 billion, excluding deposits.
The group competes with banks in the field of hire purchase, while for investment banking, its competitors are large banks and foreign banks.
In brokerage business, foreign securities houses are the main rivals, he explained.
While each business unit has different competitors, the most important thing for the group is to optimise its returns and make them sustainable for the long run, he added.
“In the next three to five years, the assets of banks might not grow much from the current level, but we aim to be a good-performance bank, as we were able achieve such a level of performance when we were a securities company,” said Aphinant.
At Phatra Securities, meanwhile, even though it is not the leader in terms of market share, profit per head is higher than the average for the brokerage industry.
The brokerage has fewer than 300 employees. After Phatra’s merger with KKP, the overall group has around 4,000 employees, of which 3,000 work on the banking side.
Aphinant said asset size did not mean as much as revenue. While Kiatnakin is a small bank that has fewer products than the universal banks, its non-interest income stands at 40 per cent.
KKP is a large-scale operator in hire-purchase lending, ranking in the top three for used-vehicle loans, and in the top five for overall auto financing.
“Hire purchase is not an easy business, as it requires a network relationship with auto dealers. We still believe it is a business that can generate a suitable profit as long as we can maintain the risk-adjusted return,” he added.