kbank investor presentation 4q14 final · 2017. 3. 22. · 1 kasikornbank for further information,...
TRANSCRIPT
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1
KASIKORNBANK
For further information, please contact the Investor Relations Unit or visit our website at www.kasikornbank.com
Investor Presentation as of 4Q14
March 2015
2
Consolidated (as of December 2014)Assets Bt2,389bn (USD72.5bn) Ranked #4 with 14.5% market share** Loans* Bt1,527bn (USD46.3bn) Ranked #4 with 14.8% market share** Deposits Bt1,630bn (USD49.4bn) Ranked #4 with 15.0% market share** CAR 17.31% ***ROE 19.38%ROA 1.97%Number of Branches 1,124Number of ATMs 9,853Number of Employees 21,614
KASIKORNBANK at a Glance
Share InformationSET SymbolShare Capital: Authorized Bt30.5bn (USD0.9bn) Issued and Paid-up Bt23.9bn (USD0.7bn)Number of Shares 2.4bn sharesMarket Capitalization Bt548bn (USD16.6bn) Ranked #2 in Thai banking sector 4Q14 Avg. Share Price: KBANK Bt234.92 (USD7.13) KBANK-F Bt235.61 (USD7.15)EPS Bt19.28 (USD0.58)BVPS Bt107.41 (USD3.26)
KBANK, KBANK-F
Established on June 8, 1945 with registered capital of Bt5mn (USD 0.15mn) Listed on the Stock Exchange of Thailand (SET) since 1976
Notes: * Loans = Loans to customers less Deferred revenue
** Assets, loans and deposits market share is based on C.B.1.1 (Monthly statement of assets and liabilities) as of December 2014*** Capital Adequacy Ratio (CAR) has been reported in accordance with Basel III Capital Requirement from 1 January 2013 onwards.
CAR is based on KASIKORNBANK FINANCIAL CONGLOMERATE. KASIKORNBANK FINANCIAL CONGLOMERATE means the company under the Notification of the Bank of Thailand re: Consolidated Supervision, consisted of KBank, K Companies and subsidiaries operating in supporting KBank, Phethai Asset Management Co., Ltd. and other subsidiaries within the permitted scope from the BOT’s to be financial conglomerate
Exchange rate at the end of December 2014 (Mid Rate) was Bt32.96 per USD (Source: Bank of Thailand)
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Table of ContentsTopic Slide Page
Operating Environment 5 - 6
2015 Financial Targets 7
Composition of Growth 8 - 11
The K-Strategy 12 - 13
Capital and Dividend 14 - 15
Summary 16
Appendix 17 - 127
4
Topic Slide Page KBank
Strategy and Segment HighlightsRisk and Credit Management Financial Performance
18-3435-3940-63
• 2014 Highlights• Net Interest Margin• Interest Income - net• Non-interest Income• Net Fee Income• Net Premium Earned - net• Other Operating Expenses• Loan• Asset Quality• Investment in Securities and Funding Structure
41-44454647
48-495051
52-5556-5960-63
The wholly-owned subsidiaries of KBank Muang Thai Life Assurance (MTL) Other Information
64-7172-7980-86
Banking System and Regulations Update 87-94 Government Policy 95-104 Thai Economic Figures 105-125 IR Contact Information and Disclaimer 126-127
Appendix
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5
Key Points:
Risk Factors:
Note: MPC = Monetary Policy Committee; at the latest MPC meeting on December 17, 2014, the Policy Interest Rate was 2.00%
Operating Environment: Economic Outlook for 2015 Key GDP Forecasts and Assumptions
Thai economy is expected to grow 4.0% (base case) in 2015, with a forecast range between 3.5%-4.5%
Growth in 2015 will likely be driven by investment, as well as a recovery in private consumption
Inflation will likely stay low, following a decline in supply-side pressure
2.9
0.7
4.0
0.0
3.0
6.0
2013 2014 2015F
% Y
oY
Source: KResearch (as of February 18, 2014) and *KBank Capital Markets Research (as of March 11, 2015)
% YoYRange Base
CaseGDP 2.9 3.5-4.5 4.0
Private Consumption 0.3 2.8-3.5 3.1
Total Investment -2.0 5.3-6.6 6.0
Gov't Budget Deficit (% of GDP) -2.0 -2.3 to -1.8 -2.0
Exports -0.2 2.0-4.5 3.5
Imports -0.5 4.0-7.0 5.5
Current Account (USD bn) -2.5 6.6-9.0 7.9
Headline Inflation 2.2 1.0-2.2 1.5
Policy Interest Rate* 2.25
2014 2015F2013
1.752.00
14.2
1.9
0.7
0.3
-2.8
-3.2
-0.3
-8.5
Recovery momentum in Thailand’s major trading partners
Progress of government budgetary disbursement and investment plans
Repercussions in energy exporting countries due to a plummet in energy prices
Impacts of downward commodities prices toward global economic recovery and farm income
Capital volatility and monetary policy management
6
Government Stimulus Plan (App. pages 95-104) The government has an ambitious plan to promote investments in infrastructure projects, including setting up a task force to encourage
related investments from the private sectorOutlook on Europe, the US, China, and ASEAN Global economic recovery remains subpar, but will become more stable in 2015
Eurozone: experienced several headwinds from Russia crisis. However, the recent move by the ECB to further reduce the interest rate to a record low and to start a European QE as well as a TLTRO* will be positive to the economy going forward
US: economic recovery is rather broad-based and remains resilient; monetary normalization is on the way China: economic growth is expected to cool further in 2015. However, a hard landing is not likely, given flexibility in China’s monetary
and fiscal policies. Some uncertainties remain, especially the fragile banking system and the health of the property sector. Going forward, China’s reform ambitions will likely help sustain the Chinese economy in the longer term
ASEAN economies: slow economic growth is expected with support from FDI, but weak global growth may restrict the pace of recovery. The change in Fed policy may pose downside risks to countries with weak external balances, leading to capital outflows
Outlook on Inflation (App. pages 108 and 111) Headline inflation remains subpar in 2015; however, the Thai government’s energy restructuring plan may limit pass-though from a decline
in global energy pricesOutlook on Exports and Tourism (App. pages 110 and 112-113) Some improvements expected in exports, but may experience some headwinds, especially a China slowdown and expiration of the EU GSP Revenue from tourism will gradually pick up in 2015, with support from the Asian market Investment continues to depend on exports; however, there may be new investments in some BOI-promoted industries, i.e. automobile and
utility sectors Impacts from Fed Policy Normalization (App. page 118-119) Impacts on the Thai economy should be rather modest, given ample domestic liquidity as well as strong external balances e.g. high
international reserves and low external debtsBaht (App. page 107) Structural appreciation trend of the USD seen late last year is expected to continue throughout 2015, mainly driven by the prospect of US
monetary policy rate normalization expected in 3Q15, and thus putting downward pressure on the Thai Baht
Operating Environment: Economic Outlook for 2015
Note: * TLTRO = Targeted Longer-Term Refinancing Operations Source: KResearch (as of January 19, 2015) and KBank Capital Markets Research (as of January 9, 2015)
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7
Consolidated 2014 Actual 2015 Targets Notes
ROE 19.38% N/A
ROA 1.97% N/A
NIM 3.80% 3.5-3.7%Ranking maintained among large commercial banks (Page 45)
Loan Growth 6.12% 8-9% Decent and sustainable loan growth; in line with economic growth (Page 8 and 52-55)
Non-Interest Income Growth* 16.84% Low teens Mainly driven by fee income and insurance business (Page 9 and 47-50)
Non-Interest Income Ratio 40.04% ~ 40%
Cost to Income Ratio** 44.30% Mid-40sCost to income ratio continues to range in the mid-40s; seasonally higher in 2H (Page 11)
Credit Cost per year (bps) 96 bps Mid-90s Prudent and aligned with global market environment and credit cycle (Page 10 and 57)
NPL Ratio (Gross)*** 2.24% 2.2-2.3%Manageable with lingering global economic environment (Page 10 and 56)
2015 Financial Targets
Notes: * Non-Interest Income includes Net Premium Earned - net (Net Premium Earned less Underwriting Expenses) from Muang Thai Life Assurance PCL (MTL); KBank has a 38.25% economic interest in MTL; on the
consolidated basis, Bancassurance fees are not included in net fee income, due to the elimination of inter-company transactions (the accounting treatment from the Muangthai Group Holding consolidation); Non-Interest Income = Total operating income – net less Interest income – net
** Cost to Income Ratio = Total Other Operating Expenses to Total Operating Income – net (Total Operating income less Underwriting Expenses)*** NPL Ratio (Gross) = NPL (gross) to total loans; NPL (gross ) used in the calculation are loans to general customers and loans to financial institutions that are non-performing loans; total loans used in the
calculation are loans to general customers and loans to financial institutions
8
Composition of Growth: Loans by Business
2014 2015 Outlook
Corporate Loans
Mainly from trade finance credit and long-term loans from real estate and commerce
Growth target on long-term investment and high capacity utilization industries with a focus on international trade customers Focused industries: construction materials, hardware, construction and
communication
SMELoans
Mainly from both long-term and short-term credits and seasonal working capital, especially from agriculture industry
Growth target reflects demand from domestic consumption and international trade benefits from the FTA and AEC Focused industries: commerce, construction materials, and hardware
RetailLoans
Mainly from mortgage loans; growth in line with industry; proactively monitoring loan portfolio quality
Conservative growth target in line with industry; maintain leading market position Focus on high value customers; proactively monitor loan portfolio quality
Note: Since 1Q13, as per the Bank of Thailand’s requirement, the Bank has complied with TFRS 8 (Operating Segments) to present operating results for each key segment in financial reports
Loan Definition (more details on loans can be found in App. page 53-54)Corporate Loans: Loans of KBank and KBank’s Subsidiaries in Corporate Segments (Annual sales turnover > Bt400mn)SME Loans: Loans of KBank and KBank’s Subsidiaries in SME Segments (Annual sales turnover ≤ Bt400mn)Retail Loans: Loans of KBank and KBank’s Subsidiaries in Retail SegmentsOther Loans: Loans in Enterprise Risk Management Division (NPL + Performing Restructured Loans), and other loan types
Loan growth continues to be decent, sustainable, and in line with economic growthLoan Portfolio Loan Portfolio Structure
(Bt bn)
6% 6%
27% 27%
36% 37%
31%30%
0
500
1,000
1,500
2013 2014
Corporate Loans
SME Loans
Retail Loans
Other Loans
1,439 1,527
* December 2013 loan base is not comparable with previous reports, due to customer migration to larger segments and changes to comply with TFRS 8
Consolidated Y2014 2014 2015Dec 13 Dec 14 Loan Growth Yield Loan Growth Target (%)
(%) Range(%)
Corporate Loans 446 456 2.2% 4-6% 4-6% SME Loans 519 572 10.3% 7-8% 8-10% Retail Loans 382 408 6.7% 6-7% 6-9% Other Loans 92 91 (0.7%) Total Loans 1,439 1,527 6.1% 6.3% 8-9%
Amount (Bt bn)
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9
15%2%
0.04%2%
16%18%
61%
60%
0
10
20
30
40
50
60
2010 2011 2012 2013 2014
Other Operating Income
Fee and Service Income - net
Net Premium Earned - net
Dividend Income
Share of Profit from Investmentson Equity Method
Gain on Investment
Gain on Trading and FXtransactions
4%
2%
64%
0.02% 2%14%
12%2%
20%
61%
0.4%
16% 14%
3%
2%
0.05% 2%
38% 38% 39% 39% 40%
24% 23% 23% 24% 24%
0
10
20
30
40
50
2010 2011 2012 2013 2014Non-interest Income Ratio Net Fee Income Ratio
18.2320.64
24.4728.81
0
10
20
30
40
2010 2011 2012 2013 2014
(Bt bn)
Note:
62% 62% 61%61% 60%
38%38%
39% 39% 40%
0
50
100
150
2010 2011 2012 2013 2014Non-interest Income Net Interest Income
(Bt bn)
December 2014 (Consolidated)Total Operating Income - net
Non-interest Income Net Fee Income
(+13%)(+19%)
Non-interest Income Ratio and Net Fee Income Ratio
75.1490.51 104.31(+20%)
(+15%)
(+22%)
(+14%)
- Non-interest Income Ratio = Non-interest Income/Total Operating Income - net - Net Fee Income Ratio = Net Fee Income / Total Operating Income - net- Net Premium Earned - net = Net Premium Earned less Underwriting Expense
(%)120.32(+15%)
(+18%)
Non-interest income growth continues to be a main driver helping to achieve long-term sustainable profitability, mainly from net fee income and life insurance premiums as a result of customer-centric strategy
2014 non-interest income accounted for 40% of total net operating income and net fee income accounted for 24%; non-interest income rose 16.8% YoY mainly from net fee income and life insurance premiums; net fee income rose 17.8% YoY mainly from card business, mutual fund business, transaction services and loan-related fees
2015 non-interest income growth will be in the low-teens, mainly driven by net fee income and life insurance premiums
Composition of Growth: Net Fees and Non-interest Income
- The Bank and its subsidiaries have adopted TFRIC13: Customer Loyalty Programmes since January 1, 2014 onwards and restated the comparative financial statements and financial ratios. There is no effect on net profit of the Bank and its subsidiaries.
28.40
34.02
40.72
47.52
(+31%)
(+20%)
(+17%)
(+20%)
138.66(+15%)
(+17%)55.52
61%
2%
21%
0.2%2%
11%
(+18%)33.94
2% 2% 2%3%
10
3.75.4 5.9
7.89.4
6.7 7.38.4
11.7
14.2
0
4
8
12
16
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
December 2014 (Consolidated)Asset Quality and Impairment Loss of Loans and Debt Securities (Provision)
(bps)(%)
6083 82
93 10266 64 66
85 96
8.88
6.85
4.44
3.09 3.76 2.91 2.45 2.16 2.11 2.240
2
4
6
8
10
2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
50
100
150
200Credit Cost NPL ratio
Asset quality remains manageable
2014 NPL ratio was at 2.24%, with a coverage ratio of 141.38%
2014 credit cost was 96bps, prudent and aligned with the macro environment and credit cycle
2015 asset quality is expected to remain manageable, with credit cost in the mid-90s bps
Note: * NPL ratio in retail business, excluding 180 dpd (days past due) of credit card and consumer loans for peer comparison
(%)
Coverage RatioProvision
NPL Ratio and Credit Cost
(Bt bn)
66.60 70.96 73.90
88.38 91.64111.02
127.12 131.83134.52 141.38
0
50
100
150
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
NPL Ratio by Business 2014
Corporate Business
-
11
2.61 2.63 2.47 2.39 2.63
0
2
4
6
2010 2011 2012 2013 2014
50.57 47.53 45.00 43.44 44.30
010203040506070
2010 2011 2012 2013 2014
Cost to Income Ratio
(%)
Cost to Income Ratio Cost to Average Assets Ratio(%)
December 2014 (Consolidated)
* * *
Cost to income ratio ranging in the mid-40s; seasonally higher in 4Q14 2014 cost to income ratio was 44.30% Cost to income ratio will be in the mid-40s in 2015
Note: * The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards and restated the comparative financial statements and financial ratios. There is no effect on net profit of the Bank and its subsidiaries.
2010 2011 2012 2013* 2014 1Q14 2Q14 3Q14 4Q14Cost to Income Ratio (%) 50.57 47.53 45.00 43.44 44.30 39.95 44.31 41.98 50.63
Cost to Average Assets Ratio (% 2.61 2.63 2.47 2.39 2.63 2.30 2.60 2.52 3.01
12
The K-Strategy
Strategic Capabilities
PRODUCT & SOLUTIONInnovate & be responsive
PRODUCT & SOLUTIONInnovate & be responsive
SERVICE QUALITYExcellent customer experience
at all channelsSERVICE QUALITY
Excellent customer experience at all channels
BRANDING & MARKETINGClear & consistent communication
BRANDING & MARKETINGClear & consistent communication
Customer Centricity
Customer Strategy
4 Product Domains8 Customer Segments*
The Way We Work
Long-Term Risk-Adjusted Sustainable Profitability
TO BE CUSTOMER’S MAIN BANK
Innovation & Product Management
Understanding Customer Needs
Sales & Service Excellence
Proactive Risk Management
KASIKORNBANK, its wholly-owned subsidiaries, and its strategic partner
I N T E G R A T I O N
Note: * The definition of the eight customer segments can be found in App. page 19
+
-
13
6.9 7.58.0 9.0 10.0
10.911.7
12.6
83 85 8586 86 85 85
0
20
40
60
80
100
0
5
10
15
2007 2008 2009 2010 2011 2012 2013 11M14
No. of Customers (mn) Overall Customer Satisfaction
Segment Performance Highlights
Overall Customer Satisfaction
Overall Customer Satisfaction ****
*** Customers in Retail Business Division (RBS) account for 94%, SME Business Division (SME) 6%, and Corporate Business Division (CBS) less than 1% of customer portfolio
**** Overall Customer Satisfaction Index are calculated using the weighted average of each of segments customer satisfaction index; the Customer Satisfaction Index in 2013 includes only SME business, and two out of four retail segments (Middle Income and Mass)
No. of Customers (mn) ***
Performance improvement driven by the success of our customer-centric strategy and new IT capabilities No. of customers grew 83% since 2007
Overall Customer Satisfaction was at 85 in Y2013
No. of customers as of November 2014 rose to 12.6mn from 11.7mn in Y2013, which grew 8.2% YTD
2.89
1.69
2.80
2.15
2.632.78 2.81
2.71
1
2
3
2007 2008 2009 2010 2011 2011(New)
2012(New)
2013(New)
26%29%
20%
26%25%24%
17%23%
24%27% 27% 28% 29%
18%
14%12%11%
10%
5%
10%
15%
20%
25%
30%
2008 2009 2010 2011 2012 2013
Average Product Holdings per CustomerMain Bank Status*
** In 2012, the Average Product Holding calculation is adjusted in all eight customer segments to align with our better understanding of customer behavior; 2011 numbers were restated for comparison purposes
Old Definition New Definition**
(Overall)
(By Business Division)
Corporate Business
SME Business
Retail Business
Main Bank Status and Market Penetration increased on track with our customer segment aspirations
* Main Bank Status = % of customers in the market who use KBank and its wholly-owned subsidiaries as their main operating bank and/or main saving and investing bank and/or main borrowing bank; the Main Bank Status of Retail Business in 2013 includes two out of four retail customer segments (Middle Income and Mass), which account 99% of retail customers
Average product holdings per customer increasing as a result of enhanced cross-selling capabilities
Overall average rose to 2.89 in 2013, from 2.80 in 2012
2.172.66 2.82 2.862.67
3.12 3.11 3.303.54
4.73
2.872.722.78
1.71
3.123.05
2.562.142.122.101.831.44
4.41 4.59
0
5
10
2007 2008 2009 2010 2011 2011(New)
2012(New)
2013(New)
Retail Business SME Business Corporate Business
14
13.4912.579.13 9.57 10.44
5.203.844.27
0
3
6
9
12
15
18
2010 2011 2012 2013 2014Tier1 Tier2
(%)
13.40 13.41
15.64 15.78
3.21
17.31
3.82
9.37 9.63 10.4312.02 12.88
4.59 4.185.55
3.88
0
3
6
9
12
15
18
2010 2011 2012 2013 2014Tier1 Tier2
(%)
13.96 13.81
15.98 15.25
3.23
Bank only KASIKORNBANK FINANCIAL CONGLOMERATE*
Capital (Reported Number: Excluding Net Profit of Each Period)
Capital adequacy remains sufficient to support business growth; maintained adequate Tier 1 ratio, as required under the Basel III
December 2014
Under Bank of Thailand regulations, net profit in the first half of the year is to be counted as capital after approval by the Board of Directors as per the Bank’s regulations. Net profit in the second half of the year is also counted as capital after approval of the General Meeting of Shareholders. However, whenever a net loss occurs, the capital must be immediately reduced accordingly.
Note: * KASIKORNBANK FINANCIAL CONGLOMERATE means the company under the Notification of the Bank of Thailand re: Consolidated Supervision, consisted of KBank, K Companies and subsidiaries operating in supporting KBank, Phethai Asset Management Co., Ltd. and other subsidiaries within the permitted scope from the BOT’s to be financial conglomerate.
** The details on Basel III regulations can be found in App. Page 91-92
Basel II Basel III Basel II Basel III
2010 2011 2012 2013 2014 1Q14 2Q14 3Q14 4Q14Bank onlyCAR (%), excluding net profit of each period 13.96 13.81 15.98 15.25 16.76 15.12 15.60 16.43 16.76Tier 1 (%), excluding net profit of each period 9.37 9.63 10.43 12.02 12.88 11.87 12.40 13.37 12.88
KASIKORNBANK FINANCIAL CONGLOMERATECAR (%), excluding net profit of each period 13.40 13.41 15.64 15.78 17.31 15.60 16.06 16.98 17.31Tier 1 (%), excluding net profit of each period 9.13 9.57 10.44 12.57 13.49 12.39 12.92 13.98 13.49
Basel II Basel III
16.76
-
15
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
(Bt) 4.00
15.4521.36
30.55 31.8832.33
42.49
32.14
27.0022.12 22.32 22.51
0
10
20
30
40
50
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
(%)
Dividend
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Dividend Per Share (Bt) 1.00 1.25 1.75 2.00 2.00 2.50 2.50 2.50 3.00 3.50 4.00
Dividend Payout Ratio (%) 15.45 21.36 30.55 31.88 32.33 42.49 32.14 27.00 22.12 22.32 22.51
Dividend policy: both operating results and long-term returns to shareholders are taken into consideration in determining dividend payments
Dividend payout ratio ranges 20-25%, in order to ensure a sustainable and adequate capital level through the changing economic environment and the ongoing adoption of Basel III
Dividend Payout RatioDividend Per Share
1.001.25
1.752.00 2.00
2.50
Interim Dividend
2.50 2.503.00
3.50
16
Summary
Customer-centric strategy effectively executed: data-mining, analytic campaign management, and multi-channel sales and services platform have enhanced our capability to quickly acquire new customers; the result is a top-notch total customer experience and strong market position
Balanced growth: loans to grow carefully in line with economic conditions; appropriate liquidity maintained; manageable asset quality supported by strong risk management capabilities; appropriate loan loss reserves; moderate non-interest income growth; manageable cost to income ratio; strong ROE maintained
Adequate capital: maintained adequate Tier 1 ratio, as required under Basel III
-
17
Appendix
18
KBank: Strategy and Segment Highlights
-
19
Eight Customer Segments Multi-Corporate Business
Large Corporate Business
Medium Business
Small & Micro Business
High Net Worth Individual
Cor
pora
te
Bus
ines
sSM
E B
usin
ess
Ret
ail B
usin
ess
Ret
ail
Bus
ines
s
Company with annual sales >Bt5,000mn
Company with annual sales >Bt400mn to Bt5,000mn
Individual or company with annual sales >Bt50mn to Bt400mn
Individual or company with annual sales ≤ Bt50mn, and with commercial credit limit ≤ Bt15mn
Individual wealth with KBank and its wholly-owned subsidiaries* ≥ Bt50mn
Individual wealth with KBank and its wholly-owned subsidiaries*≥ Bt15,000 to < Bt10mn
Individual wealth with KBank and its wholly-owned subsidiaries* < Bt15,000
Note: * Wealth with KBank and its wholly-owned subsidiaries is defined as savings and investments, such as deposit products with KBank, mutual funds with KAsset; or the monthly income of an individual customer
Affluent
Middle Income
Mass
Individual wealth with KBank and its wholly-owned subsidiaries*≥ Bt10mn to < Bt50mn
Customer-centric strategy: offering a full array of financial solutions and a satisfying experience to our customers Synergistic portfolio management by monitoring eight customer segments Offer financial solutions from among KBank, its wholly-owned subsidiaries, and the insurance company Make significant progress towards long-term aspirations; performance on track
20
Revenue by Eight Customer Segments
Note: Loan portion and loan yield of each customer segment includes loans from the Enterprise Risk Management Division (NPL + Performing Restructured Loans); figures are not comparable with loan data in other pages
Non-interest income *Loan Portion
AverageLoan Yield (%)
* Non-interest income excludes capital market business, treasury business and others
Large Corporate Business
Medium Business
Small & Micro Business
High Net Worth IndividualAffluent
Middle Income
Mass
Multi-Corporate Business
December 2014
0.5%
22.5%
3.8%0.4%
19.3%
21.9%
16.4%
15.2%4.2%
6.4%
7.4%10.0%
4.4%
9.4% 4.4% 5.6% High Net
Worth6%
Multi-Corporate Business
12%
Small & Micro
Business 12%
Medium Business
13%
Large Corporate Business
9%
Mass9%
Middle Income
28%
Affluent11%
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21
Corporate, SME and Retail Business Direction in 2015 Strategy
To attain Main Bank status for all customer segments with strong brand positioning To become a leader in digital banking and transaction banking services To affirm our commitment to service excellence in business operations and to enhance
our market position
Provide financial advisory and investment banking services
Secure #1 position in Transaction Banking
Support customers operating business in the AEC in terms of international trade and investment
Corporate Business SME Business
Strengthen #1 position in SME business by supporting existing customers and attracting new clients through K-Value Chain Solutions
Enhance the competitiveness of SME customers under “K SME Full Support for SMEs” campaign
Support customers expanding business to AEC and China
Retail Business
To attain #1 Main Bank status in all retail customer segments
Secure the lead position in Digital Banking and Transaction Banking
Maintain differentiation with expertise in financial advisory services
22
Performance and Market Position Main Bank Status: maintained #1 ranking in 2014 Trusted Partner Bank: aim to be #1 through comprehensive fund raising solutions, integrated cash management solutions, and value chain solutions Outright Trading Volume of Corporate Bonds: ranked #2 with 18% market share in 2014 Corporate Bond Underwriting: ranked #2 with 14% market share in 2014 Syndicated Loan Arranging: leading position with acclaimed expertise in utility sector Transaction Services: a top player in transactional banking services
Security Services (MFS): 38% market share in 10M14 Cash Management Services: 24% market share in 2014 Trade Finance: 30% market share in 2014
Industrial Expertise: leverage capability in utility, real estate, transportation, and commerce, etc; also, our executives have been invited to speak at seminars on green business and urbanization
Knowledge-based Organization: strive to be a knowledge-based organization for family business (KFAM Club)
19%21% 23%
23% 24% 24%
0%
10%
20%
30%
2009 2010 2011 2012 2013 2014
23% 24% 25%26% 26% 27%
0%
10%
20%
30%
2009 2010 2011 2012 2013 2014
18%15% 14%
17%
11% 14%
0%
10%
20%
30%
2009 2010 2011 2012 2013 2014
Corporate Business: Performance and Market PositionMulti-Corporate
BusinessLarge Corporate
BusinessMedium Business
Small and Micro Business
High Net WorthIndividual
MiddleIncome Mass
Corporate Bond Underwriting
Affluent
Source: The Thai Bond Market Association (ThaiBMA)
Main Bank Status
Source: KBank Customer Survey
Cash Management Services
Source: KBank Customer Survey
Note: Main Bank Status = % of customers in the market who use KBank and its wholly-owned subsidiaries as their main operating bank and/or main savings and investing bank and/or main borrowing bank
(#1) (#1) (#1)(#2) (#2) (#3) (#2)
(#2) (#2) (#2) (#2)(#1)
(#2)
(#4)
(#1) (#1)
(#2)
(#2)
-
23
27% 27% 28%29% 29%
0%
10%
20%
30%
2009 2010 2011 2012 2013
27% 29%30% 30% 30%
0%
10%
20%
30%
2009 2010 2011 2012 2013
Multi-Corporate Business
Large Corporate Business
Medium Business
Small and Micro Business
High Net WorthIndividual
MiddleIncome Mass
Affluent
SME Business: Performance and Market Position
Performance and Market Position Main Bank Status: strengthened #1 position by acquiring new trade credit customers and offering effective cross-selling cash management
solutions and packages Market Share: maintained at 30% in 2013; improved from 29% in 2010 to 30% in 2011 Market Position: strengthened #1 position in SME market – “Bank for SMEs”; targeted to be SME market leader in all areas
Improved capital usage efficiency by increasing total income to loan ratio Only bank to offer a 2-day credit approval process for small and micro SMEs, with receipt of funds within 5 days Only bank to offer comprehensive solutions to SMEs through K SME program (launched in 2006, with a total of 20 classes and about
12,000 participants so far) and K SME Knowledge Center (established in 2009)
#1 in Market Share by Value #1 in Main Bank Status
Source: KBank Customer Survey (updated annually)
(#1)
Source: KBank Customer Survey (updated annually)
(#1) (#1)(#1) (#1) (#1)(#1) (#1)
Note: - SME Business in Thailand accounts for 37.0% of Thailand’s GDP, or Bt4.2trn; 2.73 million SME customers with 0.66 million registered as legal entities (as of December 2012); supported by the government to become a key factor in economic and social growth (Source: The Office of Small and Medium Enterprises Promotion or OSMEP)
- Market Share by Value = share of revenue (derived from both credit and non-credit products) that each bank gains from the market - Main Bank Status = % of customers in the market who use KBank and its wholly-owned subsidiaries as their main operating bank and/or main savings and investment bank and/or
main borrowing bank
(#1)(#1)
24
Performance and Market Position Market Penetration**: strong market penetration to affluent customers, with 92.4% penetration in November 2014 (continual increase from 40% in 2010) Bancassurance: MTL ranked #1 in Bancassurance premiums, with 27.1% market share in new business premium and 25.0% market share in total premium (9M14);
while other players focus on Single Premium, MTL is balancing First Year Premium & Single Premium to create a sustainable portfolio Fund Management Service:
Mutual Funds: KAsset maintaining #1 position since 2010, with highest share at 22.9% in December 2014 Mutual Funds + Private Funds + Provident Funds: maintaining #1 position for 6 consecutive years, the first Asset Management Company with total AUM over
Bt1trn (21.3% market share as of December 2014) Mortgage Loans: ranked in top 3, with 8.2% market share in 9M14; conservative growth (in line with industry) and maintaining a good quality portfolio Credit Cards:
Total spending: ranked #1, with 22.4% market share in November 2014 Number of cards: ranked #2, with 17.2% market share in November 2014 Card-accepting merchant services (such as EDC, payment gateway, etc.): ranked #1, with 37.7% market share by sales volume in November 2014
Debit Cards: #1 in total debit card spending, with 36.9% market share in November 2014, also #3 in Asia Pacific (Source: VISA International 2013) Maintaining top position by providing functions and features that match with customer lifestyles, with the launch of a new Character Card (Hello Kitty#2), Ducati Card,
Co-Branded Robinson-KBank Debit Card, and Thailand Football Club Debit Card
22.9%23.1%25.5%23.7% 24.3%
0%
10%
20%
30%
2010 2011 2012 2013 2014
8.2%8.9%9.6%8.8% 9.4%
0%
5%
10%
2010 2011 2012 2013 9M14
23.5%20.5%
25.0%26.1% 27.1%
23.7%22.3%
19.2%22.1%
25.0%
0%
5%
10%
15%
20%
25%
30%
2010 2011 2012 2013 9M14
NewBusiness
TotalPremium
#1 in Mutual Fund (KAsset)
Multi-Corporate Business
Large Corporate Business
Medium Business
Small and Micro Business
High Net WorthIndividual
MiddleIncome Mass
Mortgage Loan
Affluent
(% Market Share) (% Market Share) (% Market Share)
Bancassurance*(Total Premium and New Business Premium)
(#1) (#2) (#1)(#1) (#1) (#2)(#2) (#2) (#1)(#1)
Top tier in both total and new business premium Ranked #1 in Mutual Fund AUM
(KAsset)
(#1) (#1) (#1)(#1) ( #1)(#3) (#2) (#3) (#3) (#3)
Maintaining good quality portfolio with lowest %NPL ratio among leading commercial banks
Note: * Total Premium = New Business Premium (NBP) + Renewal Premium; New Business Premium = First Year Premium (FYP) + Single Premium (SP)
Retail Business: Performance and Market Position
** Market penetration = % of customers in the market who use at least one of the products of KBank and its wholly-owned subsidiaries
-
25
21 23 2426
34 34
0
20
40
2009 2010 2011 2012 2013 2014
87 95114 117
145120
0
50
100
150
200
2009 2010 2011 2012 2013 2014
12
68 6
8 8
0
5
10
15
20
2009 2010 2011 2012 2013 2014
60 61 62 63 63 62
0
15
30
45
60
75
90
2009 2010 2011 2012 2013 2014
International Trade Service Center *
Channels: Corporate and SME Business
Corporate Business Center SME Business Center **
Cheque Direct Service
Customer facilitation in areas with good potential via opening financial service centers and cheque points
Reduction in the number of centers was a result of consolidation of some centers* Name changed from Corporate & SME Service Center to International Trade Service Center
** Excluding International Trade Service Centers; there could be more than one SME Business Center per branch
Note:
26
7,471 7,366 7,6038,740 9,853 9,394
1,014 1,067 1,398 2,195
2,775 2,696
0
5,000
10,000
15,000
2010 2011 2012 2013 2014 2015F400
600
800
1,000
1,200
2010 2011 2012 2013 2014 2015F
Branch
(+11)
Channels: Retail Business
(+23)
Self-Service Channel (ATM + CDM ) *
(+557)
(-105**)
(+568)805 816865
965(+1,934)
*** K-Lobby is an electronic banking service with multiple functions such as K-ATM, K-CDM (Cash Deposit Machines), and K-PUM (Passbook Update Machine). K-Lobby is available to serve customers both outside of branch offices and as stand-alone machines in areas without branches
(+100)
Note:
** A drop in the number of ATMs reflects a relocation plan
1,124(+159)
(+49)
Key Strategies in Channel ExpansionBranch: In 2014, we expanded our branches to serve each customer segment and lifestyle, including
engaging local customers with thematic branches - bringing the local culture into the bank In 2015, the number of branches will remain at 1,145, which is considered sufficient to provide
customer convenience Focus in 2015 will be on branch productivity improvement and e-channel migration
Self-Service Channel: #1 in number of Self-Service Channels in Thailand, with 12,628 machines in 2014 with a variety of
functions and models serving a variety of customer needs and behaviors In 2015, the number of self-service channels will be reduced to 12,090 machines, by removing
outdated and low transaction machines; this is sufficient to create convenience in transactional services
Focus in 2015 will be to increase efficiency and service availability through self-service channels Digital Banking: #1 with 29% market share of Thailand Digital Banking customers (BOT report, September 2014) #1 Top Mobile Banking Application in Thailand (36%) from Zocial inc. Survey 2014 (Independent
Research House) #1 Digital Banking Top of Mind Brand perception rating (Nielsen, 2013)
THE WISDOM Corner, Center, Lounge and Lounge@: THE WISDOM Corner, Center, Lounge and Lounge@ aim to provide superior financial/
non-financial services to our Affluent and High Net Worth Individual customer segments in key provincial areas
(-52)8,485 8,433 9,001
10,935
(+53)
(+516)
(+41)
(+1,137)(+237)
CDM (Deposit)
and CDM (Duo-
Function)
1,145
12,090
(+331)
(+797)
* Self-Service Channel includes ATMs and all types of CDM machines providing cash deposit, withdrawal ,or money transfer services 24 hours throughout the country
ATM
2010 2011 2012 2013 2014Branch 805 816 865 965 1,124 - Bangkok and Metro 46% 46% 45% 42% 39% - Upcountry 54% 54% 55% 58% 61%ATM 7,471 7,366 7,603 8,740 9,853 - Bangkok and Metro 51% 52% 51% 48% 44% - Upcountry 49% 48% 49% 52% 56%CDM 1,014 1,067 1,398 2,195 2,775 - CDM (Deposit) 1,014 1,016 1,066 1,138 1,278 - CDM (Duo-Function) 51 332 1,057 1,497K-Lobby *** 99 103 126 185 238THE WISDOM Corner, Center, Lounge and Lounge@ 31 36 75 98
(+21, delayed from 2014 )
12,628(+1,693)
(+1,113)
(+580)
(Y2014 target: +180 = 1,145)
-
27
BranchSample of Channels
K-LobbyAn electronic banking service with multiple functions such as K-ATM, K-CDM (Cash Deposit Machines), and K-PUM (Passbook Update Machine). K-Lobby is available to serve customers both outside of branch offices and as stand-alone machines in areas without branches
Thematic Branch
THE WISDOM Corner, Center and LoungeAn exclusive center providing a full range of services and facilities to High Net Worth Individual and Affluent segments
Digital Banking
Digital Banking includes:• K-Mobile Banking• K-Cyber Service
(K-Cyber Banking, K-Cyber Trade and K-Cyber Invest)
• K-Payment Gateway• K-PowerP@y (mPOS)
THE WISDOM Lounge @ Central Embassy
Branch @ Department Stores
The thematic branch is designed to blend with the local architecture and culture of each area
Thematic Branch @ Pua (Nan Province)
28
KASIKORNBANK to Capture AEC+3 Opportunities
Note: 1. Size of economy for 2014 from IMF and compiled by KResearch (as of October 15, 2014)2. 2015 GDP forecast is projected by KResearch (as of December 12, 2014) 3. ASEAN economic growth are averaged growth among ASEAN member countries in national currencies4. Greater Bangkok includes Nonthaburi, Samut Prakarn, Nakorn Pathom, Samut Sakhon, and Patumthani
GDP Thailand ASEAN
Size of Economy (GDP) in USD Trillion for 2014 0.39 3.35
2015 GDP Forecast 4.0% 5.2%
Contribution to GDP (by NESDB) 2012 Y2015F
Greater Bangkok : Provinces 45 : 55 44 : 56
ASEAN Economic Community (AEC): ASEAN member countries to become a single market by December 2015; free flow of goods & services and non tariff barrier among 10 member nations
Greater opportunities available through AEC + 3 KBank continues to enhance business in
International Trade Border Trade Cross Border Investment Retail Customer (Tourist / Expatriate / Transit) Host Country Business
Higher revenue generation and expansion of customer base “AEC Plus” framework is established to cover ASEAN,
China, Japan, and Korea through our presence and collaborative business networks with partner banks
China model developed to ensure KBank’s presence in China
To become AEC+3 Bank to capture AEC opportunities plus China, Japan, and South Korea
-
29
Note: - One subsidiary bank: KASIKORNTHAI BANK Limited, a subsidiary company in Lao PDR to operate commercial
banking business- Five international branches: Los Angeles, Cayman Islands, Hong Kong, Shenzhen, and Chengdu- One international sub-branch: Longgang- Eight representative offices: Beijing, Shanghai, Kunming, Tokyo, Yangon, Ho Chi Minh, Hanoi, and Phnom Penh- Global partners in 11 countries: Japan, China, South Korea, Germany, Italy, Lao PDR, Vietnam, Cambodia, Indonesia,
Philippines and Malaysia
AEC Plus Framework and China ModelGermany
Italy
Indonesia
JapanSouth Korea
KBank (Lao PDR)
Cambodia
Beijing Rep. Office
Kunming Rep. OfficeShenzhen Branch
Chengdu Branch Shanghai Rep. Office
Hong Kong Branch
Los Angeles International Branch
Yangon Rep. Office
Tokyo Rep. Office
Cayman Islands Branch
China
Longgang Sub-branch
Hanoi Rep. Office
Ho Chi Minh Rep. Office
Business Direction Establish branches in Phnom Penh, Cambodia; build
connectivity and collaborative business networks; enhance employees’ capabilities; aim to become the Main Operating Bank for Japanese investors in Thailand
Establish KASIKORNBANK China (Local Incorporated Institution, LII)
AEC Plus Framework: Collaborative business networks established with
partner banks overseas Global partners with 69 banks in 11 countries:
51 Japanese partner banks; 2 Korean partner banks; 3 European regional banks (in Germany and Italy); 7 ASEAN partner banks (in Lao PDR, Vietnam, Cambodia, Indonesia, Malaysia and Philippines); and 6 Chinese partner banks (as of December 2014)
Established a subsidiary bank in Lao PDRChina Model: Three branches in China include Shenzhen,
Chengdu, and Hong Kong; one sub-branch in Longgang District, Shenzhen; and three representative offices in China
SME lending and international trade business are key strategic business directions for expansion in China
Phnom Penh Rep. Office
30
KASIKORNBANK to Capture Urban Growth Opportunities
Bangkok
Note: Market Penetration = % of customers in the market who use at least one of the products of KBank and its wholly-owned subsidiaries Market Share by Value = share of revenue (derived from both credit and non-credit products) that each bank gains from the market Main Bank Status = % of customers in the market who use KBank and its wholly-owned subsidiaries as their main operating bank and/or main savings and investing bank and/or main borrowing bank
* In 2014, 25 provinces were selected as strategic provinces
Strategic Provinces expansion* started to capture urban growth opportunities and to prepare for the upcoming AEC
Different industries, customer segments, and behaviors in each strategic province in Thailand identified to capture various business opportunities with different approaches
Key areas include: Tourist Hub, Logistic Hub, Education Centre, Industrial Estate, and AEC Linkage
Aspiration to become No.1 in customers’ mind in each strategic province
Higher revenue generation from both net interest income and non-interest income expected, with a gradually increasing proportion of loans and revenue generation from the upcountry
Wider customer base in all customer segments expected, along with higher Market Penetration (especially retail customers), higher Market Share by Value, and higher Main Bank Status
As of 4Q14, the proportion of KBank’s outstanding loans in Bangkok and its metropolitan area is around 64% vs. around 36% in the upcountry
-
31
K-Transformation Foundation Capabilities
Information Technology
Capital (ITC)
Financial Information
System (FIS)
Know Our Customers
(KOC)
Multi-channel
Sales And Services
(MSS)
K-Transformation Supporting Solution (KSS)
Innovation & Product Management
Understanding Customer Needs
Sales & Service Excellence
Strategic Capabilities
Proactive Risk Management
K-Transformation Project
Completed New LoanCore Banking System in 1Q14Full completion of New Deposit Core Banking system is expected by 2015
Implemented
32
- In 2012, Average Product Holding calculation was adjusted in all eight customer segments to align with customer behavior; 2011 numbers were revised for comparison purposes- Since January 1, 2011, financial statements have been reclassified per the Bank of Thailand’s requirements; the 2009 and 2010 financial statements were restated and adjusted for comparison purposes
Note:
Key Highlights
New IT Business Capabilities Highlights
- The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards
Y2008: Know Our Customer (KOC) and Financial Information System (FIS) completed KOC key business capabilities: customer analytics; data mining; campaign management FIS key business capabilities: new chart of accounts (CoA); enhanced financial controls; enhanced budgeting capabilities; enhanced procurement
capabilities Y2011: New branch infrastructure platform rollout under Multi-Channel Sales and Services (MSS) completed
Key business capabilities: increased the effectiveness of campaign execution from MSS and KOC integration through new branch platform Y2012: Multi-Channel Sales and Services (MSS); branch roll-out completed nationwide since 1Q12
Key business capabilities: enhanced sales & service capabilities; single view of customer; multi-channel integration; legacy risk mitigation
2007 2008 2009 2010 2011 2012
1.69 2.152.71
51.54
2.782.63
47.5350.5750.9253.95
39.0435.23 39.5034.7433.55
Average Product Holdings
Non-interest Income Ratio (%)
Cost to Income Ratio (%)
14.35 12.79 15.7315.9416.72ROE
(%)
2.80
37.58
45.00
20.76
Y2007-2008: Old Financial Presentation
37.79
43.44
20.45
2013 20142.89
Y2009 onwards: New Financial Presentation
40.04
44.30
19.38
Y2014: IT Capital (ITC): Deployed new loan core banking system in 1Q14 Y2015: IT Capital (ITC): Plan to deploy new deposit core banking system; K-Transformation completed Y2015: Total remaining expenditure for K-Transformation project ~ Bt5.3bn (Total Fixed Asset Investment ~70%; Total Expense ~ 30%)
-
33
2 5 29 253
427 600 768
822 824 824 865 877 897 915 965 992 1,054 1,124
0
500
1,000
1,500
2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
KOC and MSS Benefits Highlights
Sample of Key Benefits from KOC and MSS
(No. of Branch)
New Branch Sales & Service Rollout
Branch roll-out completed since 1Q12; new platform is continuously implemented for new branch opening
Note:
- KOC = Know Our Customer- MSS = Multi-channel Sales and Services
Faster customer responsiveness and more consistent customer experience across channels
Integrated MSS with KOC capabilities; the benefits have become part of business as usual; the new MSS system:
Increase effectiveness in campaign execution through the new branch and call center platform
Increase lead referrals creation, cross-selling, and up-selling
Increase marketing campaign response rates
Increase product holdings and sales per customer; the overall average product holding per customer rose from 1.69 in 2007 to 2.89 in 2013
Increase in number of customers from 6.9mn in 2007 to 12.6mn as of November 2014
Improve overall customer satisfaction
34
New IT Business Capabilities
New Core Banking System on Loans- Open possibilities to capture new business
opportunities- Help shorten product development time- Enhance product innovation capability
New Branch Sales & Service and Call Center System Enhancement- Created unique and consistent customer
experience across channels including new infrastructure
- Enhanced cross selling capability via diverse sales and service channels
New Core Banking System on Deposits - Deployed legacy system in multiple
groups to mitigate risk of big bang deployment- To complete Big Bang Core Banking System on
Deposits in 2015
Key Deliverables and Benefits in 2014-2015
Develop a constructive and harmonious corporate culture; new IT platform to provide unique tools to support our customer-centric strategy; overcoming IT obstacles makes KBank a leader among peers
Long-term Strategic Positioning The K-Transformation project is expected to be completed by 2015 New capabilities will help enhance new product development capability,
shorten product development time, and significantly reduce maintenance costs in the long-term; as well as open possibilities to capture new business opportunities
Gradual deployment of the K-Transformation project will make the project KBank’s new standard business system platform; the project budget will be included as a part of KBank’s regular annual IT budget
KBank’s cost to income ratio will range in the mid-40s June 2013: Changes to some parts of deposit core banking system
development New deposit core banking vendor provides more benefits in the
long-term, including faster data processing, mitigated risk concerning for staff competence in maintaining system stability, and reduction in maintenance costs
1Q14: Deployed new loan core banking system; new capabilities will help enhance new product development capability, shorten product development time, and significantly reduce maintenance cost in the long term
Y2015: Plan to deploy new deposit core banking system to complete the K-Transformation project
-
35
KBank: Risk and Credit Management
36
KBank Risk Management Structure The Bank’s organization is structured to facilitate all aspects of risk management; each business unit’s
responsibilities and segregation of duties are clearly identified in accordance with good internal-control practices
Board of Directors
Audit Committee
Risk Management CommitteeSub-committee
Credit Policy and Risk Management Sub-committeeCredit Process Management Sub-committee
Market Risk Management Sub-committeeAsset and Liabilities Management Sub-committee
Operational Risk Management Sub-committeeCapital Management Sub-committee
Business Continuity Management Sub-committeeIT Strategy Sub-committee
Business FunctionsCBS/ RBS/ SME CMB/ CSP/ WBS
Risk FunctionsERM
Approve risk appetite and all risk management policies and guidelines
Ensure the adequacy and effectiveness of risk management system and internal controls
Approve risk limits according to the risk appetite approved by the Bank’s Board of Directors
Oversee and monitor risk management policies and overall risk profile under the policies and guidelines approved by the Bank’s Board of Directors
Credit Policy and Risk Management Sub-committee and Corporate Governance Committee oversee project financing requests that could have significant adverse environmental and social impacts
Risk functions are responsible for risk management policies, methodologies, and processes in order to effectively measure, monitor, and control all related risks
Business functions are accountable for managing all risks inherent in their day-to-day activities
CBS = Corporate Business Division, RBS = Retail Business Division, SME = SME Business Division, CMB = Capital Market Business Division, CSP = Corporate and SME Products Division, WBS = World Business Division, ERM = Enterprise Risk Management Division
-
37
KBank Credit Risk Management Process
Efficient collection and follow-up of customers with late payments
Restructure viable customers to prevent NPLs
Foreclose pledged assets to recover loan loss
Enhance decision making/support tools for more efficient return and risk evaluation
Setup specific prescreening criteria for potential industries
Enhance customer income validation process
Monitoring Collection & RecoveryCollection & RecoveryOrigination
Portfolio Management Determine portfolio-by-design i.e., portfolio target setting by key credit concentration dimensions (Country, Industry,
Large Customer Group) and other sub portfolio dimensions based on value-based analysis Manage portfolio according to the Bank’s risk appetite and concentration Perform stress testing to identify portfolio weaknesses and proactively prepare appropriate management actions
The Bank continues to enhance credit risk management processes to promote risk strategies with justified risk-return tradeoff within the rapidly changing economic environment
Monitor customer behavior and detect early warning signs
Leverage National Credit Bureau information for effective credit monitoring
Ensure credit condition compliance (e.g. insurance, capital injection, project progress)
Take prompt action to prevent credit deterioration
38
• Automated collection system• Efficiently utilize available behavior scoring and collection tools i.e. SMS, automated letter
generation, phone
Unsecured Credit and Merchant Product Service
Fulfillment Dept.
Credit Card/Unsecured Consumer
Housing Loan/ Secured Consumer
SM≤ Bt50mn
MB> Bt5,000mn
ME> Bt50 – 400mn
CB> Bt400 - 5,000mn
Policy Lending
• Sufficiency of cash flow• Growth trends and ability to compete• Management experience and depth• Leverage, Liquidity, and Asset Quality• Credit Risk Mitigation• Facilities Structure
Formula Lending
Corporate SME Retails
Post
App
rova
l
• Legal document• Limit set up
Credit Service Fulfillment Dept.
Bank-wide Risk Asset Review
• Customer Review by Relationship Manager (RM)• Credit Portfolio Monitoring Unit to facilitate RM in
customer monitoring• Credit Clinic
Asset Quality Management Operation Dept.
App
rova
l Pro
cess
• Legal document• Limit set up
• Application Score• FICO Score• Bureau information/Credit history• Debt service capacity• LTV
KBank Credit Approval Process
Note: MB = Multi-Corporate Business, CB = Large Corporate Business, ME = Medium Business, SM = Small & Micro Business , FICO = Fair Isaac Corporation
Formula Lending
• Application Score• FICO Score• Bureau information/Credit history• Debt service capacity • LTV (only housing loan/secured consumer)
SME Credit and Housing Loan Approval Dept.Credit Underwriting Dept.
Unsecured Credit and Merchant Product
Service Fulfillment Dept.
-
39
Credit Bureau Summary
Two Types of Credit Reports Offered by NCB:
Consumer credit report for individuals
Commercial credit report for businesses
Credit report (monthly reported by members)
Customer information (Name, address, identification number, birth date, occupation, etc.)
Credit information (History of application, approval history, loan payment history, etc.)
Data Record of Credit Report
Individuals: Credit report remains on file for 3 years
Businesses: Credit report remains on file for 3 years
Members: Financial institutions including commercial banks, specialized financial institutions (SFIs), non-bank financial institutions, finance companies, securities companies, insurance companies, etc.
KBank PracticeNational Credit Bureau (NCB)*
Note: * The concept of a credit bureau started in 1961 and central credit registration started in 1964. The Central Information Service was established in 1999 and its name was changed to Central Credit Information Service in 2000 and to the National Credit Bureau in 2005
KBank’s customers applying for loans
Corporate Business
Multi-Corporate Business
Large Corporate Business
Required to
4 Customer Segments in Retail (HN, AF, MI and MA)
Retail Business
Reject application
Sign agreement to allow the Bank to get credit report from NCB
Good credit
Small & Micro
Business
Medium Business
SME Business
Reject application
Required to (Large companies normally have reliable financial statements)
Optional to
Poor credit Good credit Poor credit
KBank’s Policy
Lending
KBank’s Credit
Scoring
40
KBank: Financial Performance
-
41
2014 Performance Highlights 2014 net profit rose 11.68% YoY,
driven by both net interest income and non-interest income
Loans grew 6.12% YoY, from all businesses; mainly driven by SME and retail business
High NIM maintained, helped by lower cost of fund and a focus on high yield lending markets
Net fee income continued to grow due to customer-centric strategy; growth entails strengthening acquisition, retention, and cross-selling capabilities
2014 cost to income ratio was at 44.30%; cost to income ratio in 2015 will range in the mid-40s
NPL slightly higher but remained manageable; high coverage ratio maintained
Strong capital base maintained
Consolidated 2013 1Q14 2Q14 3Q14 4Q14 2014Net Profit (Bt bn) 41.33 11.94 11.73 12.52 9.97 46.15Profitability - NIM 3.55% 3.61% 3.75% 3.79% 3.85% 3.80% - ROE 20.45% 21.18% 20.01% 20.59% 15.76% 19.38% - ROA 1.89% 2.08% 2.02% 2.11% 1.66% 1.97% - YTD Loan growth 8.46% 0.79% 2.29% 4.32% 6.12% 6.12% - YoY Loan growth 8.46% 6.98% 5.88% 6.24% 6.12% 6.12% - YoY Net fee income growth 17.75% 10.80% 12.42% 32.94% 15.95% 17.82% - YoY Non-interest income growth 16.69% 19.13% 7.34% 22.24% 19.48% 16.84%Cost control - Cost to income 43.44% 39.95% 44.31% 41.98% 50.63% 44.30%Asset quality - NPL ratio 2.11% 2.14% 2.14% 2.16% 2.24% 2.24% - Coverage ratio 134.52% 137.76% 140.83% 142.40% 141.38% 141.38%Loans to Deposits 94.06% 93.34% 93.90% 92.61% 93.70% 93.70%Tier 1 Ratio 12.57% 12.39% 12.92% 13.98% 13.49% 13.49%CAR 15.78% 15.60% 16.06% 16.98% 17.31% 17.31%
- The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards
Note: - Under Bank of Thailand regulations, net profit in the first half of the year is counted as capital after approval by the Board of Directors as per Bank regulations. Net profit in the second half of the year is counted as capital after approval of the GeneralMeeting of Shareholders. However, when a net loss occurs, the capital must be reduced immediately.
- Capital Adequacy Ratio (CAR) has been reported in accordance with Basel III Capital Requirement from January 1, 2013 onwards.CAR is based on KASIKORNBANK FINANCIAL CONGLOMERATE. KASIKORNBANK FINANCIAL CONGLOMERATE means the company under the Notification of the Bank of Thailand re: Consolidated Supervision, consisting of KBank, K Companies and subsidiaries operating in supporting KBank, Phethai Asset Management Co., Ltd. and other subsidiaries within the permitted scope of the BOT’s definition to be a financial conglomerate
42
Consolidated Financial Statements
- KBank acquired additional ordinary shares in MTGH, to hold a 51% stake valued at Bt7,529mn; the MTGH Acquisition was completed on November 30, 2009. As the MTGH acquisition was completed on November 30, 2009, the Bank’s consolidated financial statements from 2010 include the performance of companies in the MTGH Group for the whole year.
Statements of Comprehensive Income (Bt mn)2012 2013 1Q14 2Q14 3Q14 4Q14 2014
Interest income 96,174 106,226 27,778 27,880 28,471 29,450 113,578Interest expenses 32,593 33,428 8,283 7,300 7,177 7,686 30,446Interest income - net 63,581 72,797 19,494 20,580 21,294 21,765 83,132Fee and serv ice income 31,429 36,613 9,977 10,433 11,237 11,043 42,690Fee and serv ice expenses 6,961 7,803 2,097 2,127 2,116 2,405 8,746Fee and service income - net 24,467 28,810 7,880 8,305 9,121 8,638 33,944Total operating income 144,495 169,002 49,366 50,093 50,170 50,346 199,975Underwriting expenses 40,190 48,685 16,203 15,933 14,546 14,638 61,319Total operating income - net 104,305 120,317 33,163 34,160 35,624 35,709 138,656Total other operating expenses 46,934 52,270 13,247 15,137 14,954 18,080 61,419Impairment loss of loans and debt securities 8,390 11,743 3,660 3,036 3,661 3,886 14,243Operating prof it bef ore income tax expenses 48,981 56,303 16,255 15,987 17,009 13,742 62,994Income tax expenses 11,136 11,457 3,237 3,265 3,368 2,822 12,692Net prof it attributable: Equity holders of the Bank 35,260 41,325 11,939 11,732 12,516 9,967 46,153 Non-controlling interest 2,585 3,522 1,080 991 1,124 954 4,148Statements of Financial Position (Bt mn)
2012 2013 1Q14 2Q14 3Q14 4Q14 2014Loans to customers (less def erred rev enue) 1,326,732 1,438,978 1,450,381 1,471,922 1,501,203 1,527,080 1,527,080Total Assets 2,077,442 2,290,045 2,308,996 2,339,798 2,415,588 2,389,137 2,389,137Deposits 1,391,380 1,529,835 1,553,899 1,567,499 1,621,056 1,629,831 1,629,831Total Liabilities 1,876,621 2,053,038 2,057,979 2,080,975 2,143,653 2,108,451 2,108,451Total Equity attributable to equity holders of the Bank 184,946 219,232 231,688 237,383 248,814 257,059 257,059
Notes:
- In accordance with the corporate income tax rate reduction from 30% of taxable profit to 23% in 2012 and 20% in 2013, KBank recognized a one-time Bt1.9bn impact to the 4Q11 income statement due to deferred tax item adjustments; there was no effect on the business undertakings, profitability, or capital fund of the Bank and its subsidiaries
- The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards
-
43
20.0524.23
35.2641.33
46.15
0
10
20
30
40
50
2010 2011 2012 2013 2014
(Bt bn)
Earnings Before Provision and Tax (EBPT) and Net Profit
37.1447.49
57.3768.05
77.24
0.0010.0020.0030.0040.0050.0060.0070.0080.00
2010 2011 2012 2013 2014
(Bt bn)
December 2014 (Consolidated)
EBPT Net Profit
2010 2011* 2012 2013 2014 1Q14 2Q14 3Q14 4Q14EBPT (Bt bn) 37.14 47.49 57.37 68.05 77.24 19.92 19.02 20.67 17.63EBPT Growth (% YoY) 22.97% 27.86% 20.81% 18.61% 13.50% 15.68% 8.51% 18.68% 10.99%
Net Profit (Bt bn) 20.05 24.23 35.26 41.33 46.15 11.94 11.73 12.52 9.97Net Profit Growth (% YoY) 36.07% 20.85% 45.55% 17.20% 11.68% 18.14% 6.85% 16.84% 4.61%
* In accordance with the corporate income tax rate reduction from 30% of taxable profit to 23% in 2012 and 20% in 2013, KBank recognized a one-time Bt1.9bn impact to the 4Q11 income statement due to deferred tax item adjustments; there was no effect on the business undertakings, profitability, or capital fund of the Bank and its subsidiaries
Note:
**
EBPT and net profit in 2014 grew 13.50% and 11.68% YoY, respectively
44
15.73 16.7220.76 20.45 19.38
0
4
8
12
16
20
24
2010 2011* 2012 2013 2014
(%)
1.38 1.481.86 1.89 1.97
0
0.5
1
1.5
2
2.5
2010 2011* 2012 2013 2014
(%)
2010 2011* 2012 2013 2014 1Q14 2Q14 3Q14 4Q14
ROA (%) 1.38 1.48 1.86 1.89 1.97 2.08 2.02 2.11 1.66
ROE (%) 15.73 16.72 20.76 20.45 19.38 21.18 20.01 20.59 15.76
Note:
ROA and ROE
ROA ROE
December 2014 (Consolidated)
* In accordance with the corporate income tax rate reduction from 30% of taxable profit to 23% in 2012 and 20% in 2013, KBank recognized a one-time Bt1.9bn impact to the 4Q11 income statement due to deferred tax items adjustment; there was no effect on the business undertakings, profitability, or capital fund of the Bank and its subsidiaries
-
45
Net Interest Margin
3.48 3.75 3.58 3.55 3.80
0
1
2
3
4
5
2010 2011 2012 2013 2014
(%) (%)NIM
December 2014 (Consolidated)
Note: * Cost of deposits including contributions to the Financial Institutions Development Fund (FIDF) and Deposit Protection Agency (DPA)
Yield on Loans
Yield on Earnings Assets
Cost of Fund
Cost of Deposit*
Yield on Earnings Assets and Cost of Fund
NIM was 3.80% in 2014, remaining the highest level among large commercial banks 2014 cost of fund dropped, mainly due to early redemption of the Subordinated Debentures, the
maturity of high-rate deposits, and a decrease in average interest rate on deposits NIM will be maintained, focusing on the high-yield lending market; however, pressure from competition
is expected to rise in 2015
4.635.55 5.42 5.18 5.19
5.245.94 6.24
6.37 6.33
1.322.08 2.14 1.93 1.69
1.051.70 1.99 1.89 1.63
0
2
4
6
8
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014 1Q14 2Q14 3Q14 4Q14NIM (%) 3.48 3.75 3.58 3.55 3.80 3.61 3.75 3.79 3.85Yield on Earnings Assets (%) 4.63 5.55 5.42 5.18 5.19 5.15 5.09 5.06 5.21Yield on Loans (%) 5.24 5.94 6.24 6.37 6.33 6.33 6.29 6.34 6.46Cost of Fund (%) 1.32 2.08 2.14 1.93 1.69 1.85 1.62 1.56 1.67Cost of Deposit (%), incl DPA 1.05 1.70 1.99 1.89 1.63 1.85 1.57 1.52 1.58
46
46.7456.49
63.5872.80
83.13
0102030405060708090
2010 2011 2012 2013 2014Interest Income - net
(Bt bn)
62.27
83.6996.17
106.23113.58
15.5327.20
32.59 33.43 30.45
0
20
40
60
80
100
120
2010 2011 2012 2013 2014Interest Income Interest Expenses
(Bt bn)
Interest Income - netInterest Income and Interest Expenses Interest Income- net
December 2014 (Consolidated)
Note: KBank acquired additional ordinary shares in MTGH, to hold a 51% stake valued at Bt7,529mn; the MTGH Acquisition was completed on November 30, 2009. As the MTGH acquisition was completed on November 30, 2009, the Bank’s consolidated financial statements from 2010 include the performance of companies in the MTGH Group for the whole year.
2014 net interest income grew 14.20% YoY
2010 2011 2012 2013 2014 1Q14 2Q14 3Q14 4Q14Interest Income (Bt bn) 62.27 83.69 96.17 106.23 113.58 27.78 27.88 28.47 29.45Interest Expenses (Bt bn) 15.53 27.20 32.59 33.43 30.45 8.28 7.30 7.18 7.69
Interest Income - net (Bt bn) 46.74 56.49 63.58 72.80 83.13 19.49 20.58 21.29 21.77Interest Income - net (% Growth YoY) 17.28% 20.85% 12.55% 14.50% 14.20% 13.31% 14.77% 15.00% 13.69%
-
47
1.95 2.08 2.14 2.182.37
0
1
2
3
4
2010 2011 2012 2013 2014
(%)
16%18%
0
10
20
30
40
50
60
2010 2011 2012 2013 2014
Other Operating Income
Fee and Service Income - net
Net Premium Earned - net
Dividend Income
Share of Profit from Investments onEquity Method
Gain on Investment
Gain on Trading and FXtransactions
64%
14%
20%
38 38 39 39 40
0102030405060
2010 2011 2012 2013 2014
(%)
Non-interest Income and StructureNon-interest Income to Average Assets
Non-interest Income Ratio
Non-interest Income Structure
2010 2011 2012 2013 2014 1Q14 2Q14 3Q14 4Q14Non-interest Income (Bt bn) 28.40 34.02 40.72 47.52 55.52 13.67 13.58 14.33 13.94
Non-interest Income Growth (%YoY) 30.97 19.78 19.72 16.69 16.84 19.13 7.34 22.24 19.48
Non-interest Income Ratio (%) 37.79 37.58 39.04 39.50 40.04 41.22 39.75 40.23 39.05
December 2014 (Consolidated)
Note: - Non-interest Income Ratio = Non-interest Income/Total Operating Income - net - Net Premium Earned - net = Net Premium Earned less Underwriting Expense- The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards
28.40
34.02
40.72
47.52
(+31%)
(+20%)
(+17%)
(+20%)
55.52(+17%)
2%
21%
Non-interest income continued to grow, mainly from net fee income and life insurance premiums
2%
3%
2%
4%
61%
60%
61%
61%
2%
2%
2%2%
2% 2% 2%
2% 2%3%0.2%
0.02% 0.05%0.04%
12%
0.4%
14% 11%15%16%
48
24% 23% 23% 24% 24%
0
10
20
30
2010 2011 2012 2013 2014
(%)
18.2320.64
24.4728.81
33.94
0
10
20
30
40
2010 2011 2012 2013 2014
(Bt bn)
Net Fee IncomeDecember 2014 (Consolidated)
Net Fee Income to Net Total Operating IncomeNet Fee Income
2010 2011 2012 2013 2014 1Q14 2Q14 3Q14 4Q14Fee Income (Bt bn) 22.82 26.07 31.43 36.61 42.69 9.98 10.43 11.24 11.04Fee Income-net (Bt bn) 18.23 20.64 24.47 28.81 33.94 7.88 8.31 9.12 8.64
Fee Income Growth (%YoY) 16.77 14.25 20.55 16.50 16.60 10.71 12.72 28.27 15.21Net Fee Income Growth (%YoY) 14.36 13.22 18.56 17.75 17.82 10.80 12.42 32.94 15.95
Net Fee Income to Net Operating Income (%) 24.26 22.80 23.46 23.95 24.48 23.76 24.31 25.60 24.19Note: - On the consolidated basis, Bancassurance fees are not included in net fee income since 30 November 2009, due to the elimination of inter-company transactions (the accounting treatment from the Muangthai
Group Holding consolidation)- The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards and restated the comparative financial statements and financial ratios. There is no effect on
net profit of the Bank and its subsidiaries.
2014 net fee income grew 17.82% YoY, driven by a rise in card business, mutual fund business, transaction services and loan-related fees
Net fee income growth will continue to be helped by the cross-selling capabilities of our customer-centric strategy Net fee income to net total operating income was 24% in 2014
-
49
Others12%
Bancassurance17%
Trade Finance5%Cash
Management5%
Commercial Credit22%
Transaction Services
24%
Credit Card Business
15%
Credit Card BusinessTransaction ServicesCommercial CreditCash ManagementTrade FinanceBancassuranceOthers
Net Fee Income Structure (Bank only)Net Fee Income by Product
Loan Related and Non-loan Related Fees - net
(mainly from credit card merchant fees)
(such as ATM & debit cards, bill payments, money transfers, etc.)
(such as mutual funds, securities services, capital market business, etc.)
(mainly from commercial credit related fees)
(such as fees from payroll accounts)
(fee income obtained from selling Bancassurance products)
Note: - On the consolidated basis, Bancassurance fees are not
included, due to the elimination of inter-company transactions (the accounting treatment from the Muangthai Group Holding consolidation)
- On the consolidated basis, Net Premium Earned - net (Net Premium Earned Less Underwriting Expenses) from Muang Thai Life Assurance (MTL) is reported as a part of non-Interest Income; KBank has a 38.25% economic interest in MTL
December 2014
Loan-related
23%Non-loan
related77%
50
58.41
29.0937.12
47.52
73.09
48.69
25.2231.71
40.19
61.32
0
20
40
60
80
2010 2011 2012 2013 2014
Net Premium Earned Underwriting Expenses
(Bt bn)
3.875.41
7.339.73
11.77
0
5
10
15
20
2010 2011 2012 2013 2014
Net Premium Earned - net
(Bt bn)
Net Premium Earned - net Net Premium Earned and Underwriting Expenses Net Premium Earned – net
December 2014 (Consolidated)
Note: KBank acquired additional ordinary shares in MTGH, to hold a 51% stake valued at Bt7,529mn; the MTGH Acquisition was completed on November 30, 2009. As the MTGH acquisition was completed on November 30, 2009, the Bank’s consolidated financial statements from 2010 include the performance of companies in the MTGH Group for the whole year.
2010 2011 2012 2013 2014 1Q14 2Q14 3Q14 4Q14Net Premium Earned (Bt bn) 29.09 37.12 47.52 58.41 73.09 19.22 18.96 17.53 17.38Underwriting Expenses (Bt bn) 25.22 31.71 40.19 48.69 61.32 16.20 15.93 14.55 14.64
Net Premium Earned - net (Bt bn) 3.87 5.41 7.33 9.73 11.77 3.02 3.03 2.98 2.74Net Premium Earned - net (% Growth YoY) n.a. 39.84 35.41 32.79 20.96 35.29 6.42 15.28 32.64
Net Premium Earned - net = Net Premium Earned less Underwriting Expense
-
51
Other Operating ExpensesOther Operating Expenses Structure
December 2014 (Consolidated)
43% 46% 46%46%
23%22%
21%7%7%
8%0.2%0.2%
0.3%
27%25%
25%
3%
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014
Impairment on ApplicationSoftware & Related Expenses
Others
Directors' remuneration
Taxes & Duties
Premises & Equipment
Employee's expenses
44%
20%
8%
24%
0.2%
27%
7%
20%
0.2%38.00
43.0246.93
(Bt bn)
52.27
2010 2011 2012 2013 2014 1Q14 2Q14 3Q14 4Q14Other Operating Expenses (Bt bn) 38.00 43.02 46.93 52.27 61.42 13.25 15.14 14.95 18.08
% Growth (YoY) 21.27 13.20 9.10 11.37 17.50 15.56 15.98 16.62 21.09
Note: The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards
61.42
2014 other operating expenses rose 17.50% YoY, the majority came from employee’s expenses, and marketing expenses
52
14.4312.43
9.57 8.466.12
0
5
10
15
20
2010 2011 2012 2013 2014
(%)
Loan Growth December 2014 (Consolidated)
Loan Growth (% YoY)
2010 2011 2012 2013 2014 1Q14 2Q14 3Q14 4Q14Loans (Bt bn) 1,077 1,211 1,327 1,439 1,527 1,450 1,472 1,501 1,527
Loan Growth (% YoY) 14.43 12.43 9.57 8.46 6.12 6.98 5.88 6.24 6.12
Loan Growth (% YTD) 14.43 12.43 9.57 8.46 6.12 0.79 2.29 4.32 6.12
Loans grew sensibly at 6.12% YoY from all businesses, mainly driven by SME and retail business
-
53
Loan Structure and Loan Growth TargetsDecember 2014 (Consolidated, TFRS 8: Operating Segments*)
Loan Portfolio Structure Loan Structure, Loan Yield and Loan Growth Targets
** December 2013 loan base is not comparable with previous reports, due to customer migration to larger segments and changes to comply with TFRS 8
Loan Definition (TFRS 8: Operating Segments)Corporate Loans: Loans of KBank and KBank’s Subsidiaries in Corporate Segments (Annual sales turnover > Bt400mn)SME Loans: Loans of KBank and KBank’s Subsidiaries in SME Segments (Annual sales turnover ≤ Bt400mn)Retail Loans: Loans of KBank and KBank’s Subsidiaries in Retail SegmentsOther Loans: Loans in Enterprise Risk Management Division (NPL + Performing Restructured Loans), and other loan types
Note: * Since 1Q13, as per the Bank of Thailand’s requirement, the Bank has complied with TFRS 8 (Operating Segments) to present operating results for each key segment in financial reports
6% 6%
27% 27%
36% 37%
31%30%
0
500
1,000
1,500
2013 2014
Corporate Loans
SME Loans
Retail Loans
Other Loans
1,439 1,527
Y2014 Loan Growth Target (%): Corporate 5-7%, SME 6-8%, Retail 6-9%, Total Loans: Less than 8%
(Amount in Bt bn) Dec 13** Y2013 Dec-14 Y2014 2014 Y2015Loan Loan Yield Loan Growth
Growth Growth Range Target (%)(%) (%) (%)
1) Corporate 446 6.7 456 2.2 4-6% 4-6%Multi-Corporate Business 222 8.3 223 0.6Large Corporate Business 224 5.2 233 3.8
2) SME 519 10.9 572 10.3 7-8% 8-10%Medium Business 270 6.6 299 10.6Small and Micro Business 246 16.9 270 9.7
3) Retail 382 10.3 408 6.7 6-7% 6-9%4) Others 92 (2.9) 91 (0.7)Total Loans 1,439 8.5 1,527 6.1 6.3% 8-9%
54
Loan by Retail Products (All Segments) December 2014 (Consolidated, TFRS 8: Operating Segments*)
Loan Definition (TFRS 8: Operating Segments)Housing Loans: KBank’s housing loans to retail customer segmentsCredit Cards: KBank’s credit card loans to all eight customer segmentsConsumer Loans: KBank’s consumer loans to retail customer segmentsKLeasing: KLeasing’s loans to all eight customer segments
Note: * Since 1Q13, as per the Bank of Thailand’s requirement, the Bank has complied with TFRS 8 (Operating Segments) to present operating results for each key segment in financial reports
Loan by Retail Products
** December 2013 loan base is not comparable with previous reports, due to customer migration to larger segments and changes to comply with TFRS 8
(Amount in Bt bn) Dec 13 Y2013 Dec 14 Y2014 % PortionLoan Loan to
Growth Growth Total Loan(%) (%)
Housing Loans 215 5.5 225 4.7 14.7Credit Cards 66 21.8 76 15.8 5.0Consumer Loans 44 17.8 50 13.8 3.3KLeasing 89 7.7 90 0.7 5.9
-
55
54.3% 51.2% 48.9%48.9% 48.1%
5.7% 6.2%6.5% 6.7%
6.9%10.7%
12.4% 13.0%13.0% 12.5%15.5%
16.0% 16.0%15.5% 14.8%
11.4%11.6%
13.1%13.6%
15.7%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2010 2011 2012 2013 2014
OthersHousing LoansUtilities & Services
Real Estate & ConstructionManufacturing & CommerceAgricultural and Mining
2.0%2.3%2.4%2.5%2.5%
1,527
1,0771,211
1,3271,439
6 months and over14.0% Immediate Repricing
61.5%< 6 months
11.8%
Other12.7%
Loan Portfolio Breakdown by Industry, Currencies, and Interest Rate
Loan Portfolio by Industry (December 2014)
Definition of Loans1) by industry = Gross loans = Loans to customers less deferred revenue2) by currency = Loans to customers and AIR - net3) by maturity of interest repricing = Loans to customers less deferred revenue
By Maturity of Interest Repricing (December 2014)*
By Currencies (December 2014)*
Note:
Thai Baht92.1%
US Dollar7.0%
Other Currencies0.8%
*The information on loans breakdown by currencies and maturity of interest repricing are disclosed on half year basis
December 2014 (Consolidated)
(Bt bn)
56
111.02127.12 131.83 134.52 141.38
0
50
100
150
2010 2011 2012 2013 2014
2.91 2.45 2.16 2.11 2.24
0
2
4
6
8
2010 2011 2012 2013 2014
Asset QualityDecember 2014 (Consolidated)
NPL Ratio(%)
Coverage Ratio(%)
2010 2011 2012 2013 2014 1Q14 2Q14 3Q14 4Q14NPL Ratio (%) 2.91 2.45 2.16 2.11 2.24 2.14 2.14 2.16 2.24
Coverage Ratio (%) 111.02 127.12 131.83 134.52 141.38 137.76 140.83 142.40 141.38
NPL ratio was 2.24% in 2014 Coverage ratio was 141.38%; this ratio has been maintained above 100% since 2Q10 2015 asset quality is expected to remain manageable
-
57
66 64 6685 96
0
50
100
150
2010 2011 2012 2013 2014
6.70 7.358.39
11.7414.24
0.00
4.00
8.00
12.00
16.00
2010 2011 2012 2013 2014
Impairment Loss of Loans and Debt Securities (Provision) and Credit CostDecember 2014 (Consolidated)
Impairment Loss of Loans and Debt Securities Credit Cost
2010 2011 2012 2013 2014 1Q14 2Q14 3Q14 4Q14Impairment Loss of Loans and Debt Securities (Bt bn) 6.70 7.35 8.39 11.74 14.24 3.66 3.04 3.66 3.89
Credit Cost (bps) 66 64 66 85 96 101 83 99 103
(Bt bn) (bps)
2014 credit cost increased to 96bps, to be prudent and aligned with the macro environment and credit cycle 2015 credit cost will continue to range around mid-90bps
58
17%17%26%22%24%22%27%38% 22%
83%83%62%
73%78%
76% 78% 74% 78%
0
20
40
60
80
100
2006 2007 2008 2009 2010 2011 2012 2013 2014% of Performing Restructured loans to Restructured loans % of Non-Performing Restructured loans to Restructured loans
13.412.5
15.115.9
18.717.3
16.1 16.7
0
5
10
15
20
2006 2007 2008 2009 2010 2011 2012 2013 2014
(Bt bn)
12.1
0.0
5.0
10.0
15.0
Write-off 11.6 8.7 4.3 5.5 4.3 3.9 5.0 10.3 7.3
2006 2007 2008 2009 2010 2011 2012 2013 2014
Bad Assets Resolution
(Bt bn)
December 2014 (Consolidated)Outstanding Foreclosed Properties
Note: * On September 11, 2013, the Bank was formally notified of its final loss sharing portion under the asset transfer agreement with TAMC established in October 2001. This amounted to Bt206mn. An amount of Bt1,159mn relating to the provision for losses recorded in prior years has been reversed through profit or loss in 2013.
(Bt bn)
2001-2004: KBank sold NPLs totaling Bt14.6bn to TAMC*
2007: KBank and Phethai AMC sold NPLs totaling Bt11.4bn to Standard Bank Asia Limited and Morgan Stanley Emerging Markets Inc. at Bt7.6bn and Bt3.8bn, respectively
2008-2014: NPLs continued to decline without bulk NPL sales
Write-offs NPL Portfolio Sales Sales of Foreclosed Properties
Restructured Loans
(Bt bn)
52.3367.01
77.1974.50
% of Restructured loans to Total loans
Outstanding Restructured Loans was Bt93.52bn in 2014; 83% were performing restructured loans Definition: Outstanding Restructured Loans is the accumulated outstanding amount of restructured loans,
comprised of performing restructured loans and non-performing restructured loans. Non-performing restructured loans are already counted as part of Non-Performing Loans (NPLs)
Restructured loans
61.5176.70 82.38
9.1%6.9% 7.4%
8.2%6.9% 6.3% 6.2% 5.9% 6.1%
0%
4%
8%
12%
16%
2006 2007 2008 2009 2010 2011 2012 2013 2014
85.8393.52
2.8
4.14.8
5.6
7.2
5.05.65.45.0
6.0
0
2
4
6
8
10
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
-
59
Proactive risk management to counter political economic impact and high household debt
SME Business
Selective on quality customers Proactive risk management by visiting customers;
raise productivity of sales teams and relationship manager
Efficient collection process Offer financial aid package for SMEs who need urgent
financial aid to temporarily alleviate customer burden Cut overdraft (OD) rate of 3% for 3 months Offer 6-month grace period for principal payment
Retail Business
Shift towards customers that are less sensitive to high household debt (high income customers)
Proactive and efficient collection process Analyze behavior regularly to identify weak spots Slow growth with focus on high-income customers Efficient collection process Improve asset quality better than the market
Continue to deploy proactive credit portfolio/ risk management/ asset quality management to mitigate an adverse impact from former political unrest and high household debt
High-impact customers: review policy/ process, and offer financial aid programs Low-impact customers: closely monitor
60
6% 2% 2% 2% 4%
65% 64%68%
68%60%
28% 33%
29%
29% 35%
0.6% 0.7%
0.4%0.3%
0.1%0.1%
0.04%
0.07% 0.08%
0
100
200
300
400
500
600
2010 2011 2012 2013 2014
Trading Available-for-sales Held-to-maturity
General Investment in Receivables Investments Subsidiaries
(Bt bn)
251 264
382
497 568
81%81%
79%78%83%
10%
9%
11%
12%8%
4%
4%
4%
4%3%
5%
5%
5%
5%5%
0.3%0.4%
0.5%
0.1%0.2%
0
100
200
300
400
500
600
2010 2011 2012 2013 2014Other Investment (Investments in Receivables, Investments in Subsidiaries and Other Investments)Equity InvestmentForeign BondsCorporate BondsGovernment & State Enterprise Bonds
(Bt bn)
251 264
382
497568
Investment in Securities Portfolio and Structure
Note: Accounting for investments 1) Trading: Stated at fair value (FV). Unrealized gains or losses arising from changes in FV are recognized in the income statement 2) AFS: Stated at FV. Unrealized gains or losses arising from revaluation are reflected in the equity 3) HTM: Stated at amortized cost, after deduction of any allowance for impairment
December 2014 (Consolidated)
Instrument Type Holding Type
KBank continues to manage its investment portfolio by focusing on ensuring sufficient liquidity at all times and adjusting investment position to reflect interest rate trend and enhance risk-adjusted return
0.4%
2010 2011 2012 2013 2014 1Q14 2Q14 3Q14 4Q14Investment Portfolio (Bt bn) 251 264 382 497 568 512 532 529 568
% Growth (YoY) (1.48) 5.21 44.66 29.97 14.24 49.72 20.79 14.79 14.24
0.06%0.07%
0.4% 0.3%0.3%
-
61
93.7%94.1%95.4%
97.5%97.9%
93.2%92.9%94.1%94.7%93.5%
85%
90%
95%
100%
2010 2011 2012 2013 2014Loans to Deposits Loans to Deposits + B/E
1,1001,242
1,3911,530 1,630
5