Krungsri plans Bt10 bn issue in sub-debt

President and chief executive officer Noriaki Goto said yesterday that Krungsri’s three-year business plan for 2015-17 was focused on three key strategic themes: first, to grow assets; second, to increase non-interest income; and third, to reduce the cost of funding.

Thailand’s fifth-largest bank reported total assets of Bt1.7 trillion at the end of last year.

Its BIS (Bank for International Settlements) capital-adequacy ratio last year fell to 13.6 per cent from 14.7 per cent in 2014, as the bank had redeemed sub-debt worth Bt20 billion, leaving its Tier 2 capital ratio at 1.6 per cent.

Krungsri’s chief financial officer, Duangdao Wongpanitkrit, added that on the basis of Bt10 billion worth of sub-debt issuance equating to an additional 0.75 per cent in capital, the bank’s Tier 2 capital ratio would stand at 2.35 per cent after this year’s planned issuance.

The Bt10-billion debt issuance would also lift its capital-adequacy ratio to 15.95 per cent.

Under the three-year plan, Krungsri wants to expand its assets, especially in corporate and commercial loans, Goto said.

Thai corporates, Japanese companies and multinationals are the bank’s focus, he said, pointing out that the economic slowdown might not support loan growth among small and medium-sized enterprises. Krungsri’s SME lending this year is expected to grow by just 3 per cent, while retail and corporate loans are expected to expand by 7-7.5 per cent and 6 per cent respectively.

The economic slowdown over the past two years has affected its loan-growth target, and resulted in single-digit asset growth in the period, he added.

Excluding asset transfers from Bank of Tokyo-Mitsubishi UFJ (BTMU), Krungsri’s assets last year grew by 4.7 per cent.

The bank this year targets loan growth of 5-6 per cent, and 5 per cent in 2017, its president said.

Goto said several other Thai banks had also been focusing on the corporate sector, and the fierce competition in the sector, plus the low yield on corporate lending, meant that Krungsri’s net interest margin this year should stay at the current level of 3.7 per cent, against 4.15 per cent last year.

Therefore, the bank has to manage its funding costs by focusing on increasing CASA (current account and savings account) business, he added.

The bank this year aims to become a top-tier financial group in Asean by expanding its network and customer base for both retail and corporate customers, especially in CLMV countries (Cambodia, Laos, Myanmar and Vietnam), Goto explained.

Krungsri currently has a joint-venture company – Krungsri Leasing Services – in Laos, operating an auto-loan and personal-finance business, and a representative office in Myanmar.

For the rest of this year, the bank will continue to explore opportunities in Vietnam by leveraging BTMU’s presence there.BTMU holds a 20-per-cent stake in the Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank).

Krungsri is also interested in consumer-finance business in the Vietnamese market, including auto loans. 

Early this year, Krungsri signed an agreement to acquire Hattha Kaksekar, the fourth-largest microfinance institution in Cambodia.

The transaction is yet to be completed, as Krungsri will first propose the matter for shareholder approval at its annual general meeting, Goto added.

He also said that while the bank was closely monitoring digital banking and the change in consumer behaviour in using financial services, physical-branch expansion was still a priority as the number of Krungsri branches around the country was still well behind the numbers operated by each of the Kingdom’s top four banks.

Krungsri has 636 branches, while the top four players all have more than 1,000.

The bank will add 30 new branches this year, and 700 new automated teller machines.

Goto said that in its next three-year plan (2018-20), Krungsri might, however, scale down its branch expansion and further embrace digital banking.

It has allocated a budget for studying the introduction of financial technology, he added.