KBank Upholds Commitment to Customers amidst Economic Challenges
KBank, the third-largest lender in Thailand, has reaffirmed its commitment to supporting vulnerable clients in managing their debt amid the current economic climate. In an exclusive interview with the Bangkok Post, Rungruang Sukkirdkijpiboon, the bank’s co-president, highlighted KBank’s cautious approach to expanding its retail loan portfolio in line with the country’s economic conditions.
Focus on Existing Clients
Amidst challenges such as uneven economic recovery, high household debt levels, and slow income growth, KBank has shifted its focus towards supporting existing clients rather than aggressively expanding new loans. Mr. Rungruang emphasized the importance of ensuring that customers do not feel burdened by their debt, stating, “It’s essential for us to verify that loan applicants have the capacity to repay their debts before approving loans.”
Asset Quality Concerns
KBank is particularly concerned about the asset quality of vulnerable customer segments and aims to monitor and support them effectively. With Thailand’s household debt nearing 90% of GDP, the bank is implementing strategies to address this issue, including focusing on increasing household income rather than rapidly growing consumer loans.
Selective Growth Strategy
To strengthen its retail banking business, KBank has prioritized secured loan products such as housing and auto loans. The bank’s core strategy revolves around selective growth, seeking opportunities in niche businesses while shifting its focus towards higher-income customers. Despite challenges, KBank remains committed to maintaining consistent lending criteria and supporting its existing depositors with established transaction histories.
Challenges in Loan Approval
Many prospective borrowers, especially first-time workers and the younger generation, face challenges in qualifying for loans due to marginal income growth. While KBank has not tightened its loan conditions, some applicants struggle to meet the debt servicing capacity required for approval. Existing clients also exhibit signs of weaker repayment capability as income growth lags, posing challenges for reducing principal loan balances.
Market Position and Growth Targets
KBank holds a significant share in the housing loan market and leads in the credit card market with a 19.6% share of total card spending. The bank aims to maintain asset quality by closely monitoring credit cardholders’ payment behaviors. KBank has set conservative loan growth targets for 2024, focusing on maintaining asset quality and supporting existing customers rather than pursuing aggressive growth. Retail loan growth for the following year is projected at 2-3%, aligning with Thai GDP growth.
Future Outlook
Looking ahead to 2025, KBank anticipates aligning its total loan and retail loan growth with Thai GDP growth while remaining cautious in its approach. Despite challenges in meeting growth targets for 2024, the bank is confident in its strengths and readiness to accelerate growth when the economic cycle improves. KBank’s retail banking business benefits from a strong network, talented workforce, and supportive organizational culture, although internal operational processes may require further strengthening.
Financial Performance and Asset Quality
KBank posted a year-on-year growth rate of 1.56% in the first half of the year, falling short of its total loan growth target for 2024. The decline in SME loans, credit card loans, and personal loans offset growth in corporate and home loans. The bank’s gross non-performing loan ratio stood at 3.18% as of June this year, with a target of keeping bad debt below 3.25% by year-end.
In conclusion, KBank’s commitment to supporting customers through challenging economic times underscores its dedication to maintaining asset quality and ensuring sustainable growth. By focusing on existing clients, implementing a selective growth strategy, and closely monitoring market trends, KBank aims to navigate the evolving financial landscape while upholding its reputation as a trusted financial institution in Thailand.