Sunday, 16 June 2024

KBank targets double-digit return on equity within 2026

5 min read

KBank has adopted a 3+1 strategy that is about focusing on three priorities to generate sustainable growth, and an additional mission to generate new income in the medium and long term.

Kattiya Indaravijaya, CEO of KBank, said: "KBank aims to be a solidly dependable partner to our customers and other stakeholders, and to deliver solid performance to our shareholders in an increasingly unpredictable global economic environment."

She noted that the Thai economy is predicted to grow at around 3%, annually, during the next three years, and that during 2024 it is estimated to grow 3.1% with a K-shaped recovery, driven mainly by tourism, exports and public spending amid global economic uncertainty.

Indaravijaya said: "The banking sector is also expected to face challenges from the uncertain economic conditions on both the domestic and global fronts, and it will be looking to stay abreast of changing consumer behaviour through service developments, as well as tracking the emergence of new financial service providers beyond financial institutions. KBank will implement a plan that we have called our 'Strategies 3+1' which are aimed at ensuring the banks is well prepared to both withstand and capitalise on these realities, and, ultimately, to deliver double-digit return on equity within 2026."

'Strategy 3+1' will focus KBank on three strategic priorities

The first strategic priority, reinvigorate credit performance, is to enhance the bank's performance with its credit products. This entails driving even closer collaboration with good credit customers with greater customisation of service and product offerings, as well as adopting proactive customer retention programmes for sustained growth. While focusing on quality growth, KBank targets growing its loans in 2024 by 3% to 5%, along with enhancing end-to-end transformation to elevate credit capabilities for business growth.

The second strategic priority is to scale up its capital-lite fee income businesses. Foremost among those initiatives is further upgrading its wealth advisory businesses and offering a comprehensive service that can meet customer's needs throughout all their life stages. A full range of comprehensive investment products, including mutual funds, bancassurance, and etc., from KBank and Kasikorn Asset Management (KAsset) together with our partners, will also be offered along with enhancing sale and servicing model. All of these services will be delivered to our customers through comprehensive service outlets. The bank intends to grow mutual fund assets under management (AUM) of KAsset by around 30% to 40% by 2026. At the end of 2023, mutual fund AUM was THB 924 billion ($25.9 billion).

As part of its second strategic priority, KBank also aims to further strengthen the market-leading position of its very popular K PLUS mobile banking platform, especially in digital payment service. through new initiatives that will make it even more popular because of its secure, convenient, and intuitive use across all functionalities.

The third strategic priority (strengthen and pioneer sales and service models to deliver value-based results) is to strengthen the bank's existing distribution platforms and channels as well as pioneer new ones to maximise convenience for customers at all times and locations. As part of this, KBank will integrate a leading position in K PLUS with multiple other platforms and applications as well as physical channels. This endeavor aims to provide customers a safe and seamless cross-channel experience. As a result of these initiatives, KBank forecasts an increase in the number of K PLUS users of around 20% to 30% by 2026, maintaining its leading position. The number of K PLUS users at the end of 2023 was 21.7 million.

Additionally, as the '+1' of its core strategies, KBank will create new revenue through investments of Kasikorn Investure (KIV), regional business expansion, and developing solutions that go beyond banking. The contribution from the '+1' of its strategies is estimated at around 5% of net profit within the next five years.

"The strategies are consistent with our prioritisation of selective growth focusing on a prudent credit policy, and maintenance of a capital level appropriate for the economic environment, and, in line with these, the bank has set appropriate financial targets for 2024," she added.

Synergy of three enablers 'IT – Data – Human Resources' to achieve goals, driving Thailand's economy forward

Three key enablers to advance K-Strategy consist of: Modern Technology for improvement of work efficiency and development of innovative services, making KBank the top regional financial service provider; Scalable Data and Analytics serving as comprehensive tools for enhanced business opportunities and operational efficiency; and Performance-Driven Organisation, essential for achievable work plans and measurable outcomes.

Kattiya added: "KBank is confident that its operations based on the principles of a Bank of Sustainability and the 'Strategy 3+1' will enable the bank to respond to the prevailing circumstances in a timely and balanced manner, strengthen its business foundation, and provide quality services that meet customer needs, while promoting career growth for employees within the organisation. The bank expects to achieve double-digit return on equity (ROE) by 2026, and to deliver sustainable returns to all stakeholders, and contributing to the prosperity of Thai economy".

KBank's 2024 financial targets focus on prudent growth amid a challenging economic environment

Under these circumstances, KBank prioritises prudent growth, focusing on a prudent credit policy, and maintenance of a capital level appropriate for the economic direction. The bank has therefore set its 2024 financial targets as follows:

Loan growth of 3% to 5%, sensible and in line with the economy, focus on growing quality loans in selective recovering sectors, secured loans and regional expansion strategy; continue focusing on asset quality by revamping credit strategy, reinvigorating key capabilities, and enhancing end-to-end transformation. The bank targets growing corporate loans by 2% to 4%, SME loans by 1% to 2%, and retail loans by 1% to 2%.

Net interest margin (NIM) maintains, in line with interest rate trend and selective loan growth, cost of funds remains high from last year rising interest rate.

Net fee income growth improved with mid to high-single digit growth, driven by new strategic growth in wealth management business; despite lower conventional transaction fees due to changing consumer behaviour.

Cost-to-income ratio is expected to stand at low to mid-40s with moderate revenue growth; potential investment to support K-Strategy; continuing cost management and productivity improvements.

NPL ratio (Gross) less than 3.25%. Stable NPL ratio amid uncertain economic recovery.

Credit cost is expected to be in the range of 175 to 195 bps, with continued prudent financial policy to cover future uncertainties.

 

Re-disseminated by The Asian Banker

Attend Our Next Events
Finance Vietnam 2024
18 July 2024
Finance Thailand 2024
25 July 2024
Finance Philippines 2024
07 August 2024