KBank seeks board approval to guarantee 4G winners

He said the bank was interested in providing guarantees to both True Move H Universal Communication and Jasmine International, the winners of the auction of fourth-generation telecom licences. However, the amount of the bank guarantee will not go above 25 per cent of its Tier 1 capital.

Both companies are KBank customers. However, the bank has not been contacted by Jasmine International yet, he said.

A commercial-bank source said True Move H was expected to submit a bank guarantee of Bt75 billion to the National Broadcasting and Telecommunications Commission next month, and at least four banks would join in providing the guarantees. They are Bangkok Bank, Siam Commercial Bank, KBank and Industrial and Commercial Bank of China (Thai). ICBC (Thai) is interested in supporting True because the bank is a lender to China Mobile International, which now has an 18-per-cent stake in True Corporation, the parent company of True Move H.

Krungthai Bank is asking its board of executives for approval to guarantee True Move H as well, the source said.

Another commercial-bank source said Jasmine had been asked by Bangkok Bank to come up with a new business plan for its 4G business. The Jasmine case is unlike True Move’s because JAS is a new player in telecommunications and is making a large investment, so the banks are being cautious.

Meanwhile, Patchara said KBank would not aggressively pursue lending to business customers as it has to look after its capital to deal with the International Financial Reporting Standards (IFRS), which will change the formula for calculating bad-debt provisions in three years.

The gradual reduction of return on equity from a high of 15 per cent to 7 per cent currently was due to high loan-loss provisions, mainly for small and medium-size enterprise clients. This forced the bank to focus more on its health, he said.

As the market leader in SME lending, KBank has had to launch assistance measures to customers affected by the economic slowdown. Some have been able to recover but some fell into bad debt. Non-performing loans (NPLs) in the SME business division reached 3.08 per cent at the end of last year.

 

Provisions for bad debt

As of the end of 2015, KBank had anted up Bt87 billion in credit to help troubled SME clients, down from Bt96 billion at the end of the third quarter, a reduction Patchara said was a key indicator of the economic recovery. 

According to the IFRS, in 2019, financial institutions will have to increase their provisions for bad debt. This will have an impact on capital, so KBank needs to ensure that its capital will be sufficient under the new formula, he said.

As at the end of last year, outstanding loans by KBank’s SME business division had grown by 7 per cent to Bt613 billion, part of which was the extra credit to help SME customers restructure their finances. This year, lending to SMEs is targeted to grow by 5-7 per cent. 

For corporate customers, to which the credit lines are larger than to SMEs, the bank will assist those raising funds through capital markets. The stock market might not be positive for corporations wanting to raise funds via initial public offerings, so real estate investment trusts and corporate bonds are the choice, he said.

“There are six or REIT deals in the pipeline, and the bank expects two of those to be launched this year,” Patchara said.

Last year, outstanding corporate loans expanded by 4 per cent to Bt468 billion, and this year, the bank will control loan growth in the range of 4-6 per cent. The low debt-to-equity ratio of corporate customers is providing room for them to raise funds, he said.

“The [corporate] customers also look for investments abroad, 90 per cent of which are in Asean. The trend of investing abroad is increasing. Our survey found that the amount of outbound investment this year would reach Bt4.3 trillion, up from Bt4.2 trillion last year,” he said.