Kasikornbank (KBank) is exploring new ways to increase revenue by managing bad loans through joint venture asset management companies (JV-AMCs) due to the growing number of non-performing loans (NPLs) in the banking industry. Co-president Rungruang Sukkirdkijpiboon stated that the bank is in the process of setting up a new JV-AMC in partnership with Bangkok Commercial Asset Management (BAM) alongside its existing joint venture JK AMC. The main objective of these JV-AMCs is to create additional sources of income for the bank.
Mr. Rungruang expressed his belief that the bad asset management business will become a significant source of revenue as NPLs continue to rise. By collaborating with experts in this field, KBank aims to tap into new revenue streams and effectively manage distressed assets. KBank, being the third-largest lender in Thailand by total assets, currently operates JK AMC through its subsidiary Kasikorn Vision in collaboration with JMT Network Services. The bank is awaiting approval from the Bank of Thailand for the business license of the second JV-AMC with BAM.
BAM, the largest AMC in the country, specializes in managing secured bad loans with fixed-asset collateral, while JMT focuses on handling consumer and unsecured bad debts. These JV-AMCs are expected to offer KBank the option to manage distressed assets more efficiently. However, Mr. Rungruang clarified that the bank does not prioritize transferring its own bad debts to these ventures. Any sale of distressed assets to the JV-AMCs would follow the same process as sales to other AMCs.
Despite the rise in NPLs, KBank continues to manage its distressed assets internally through its bad asset management and debt collection teams. The bank has been successful in keeping its NPL ratio at 3.18% as of June 2023, in line with its target ceiling of 3.25% by the end of the year. Additionally, KBank’s credit cost remains within the target range of 175-195 basis points for the year at 189 basis points.
KBank and BAM recently announced their plan to establish a new JV-AMC with registered capital of 25 million baht, with each party holding a 50% stake. This initiative aligns with the central bank’s policy introduced during the pandemic to address NPLs in the banking sector. Moreover, the central bank has approved a business license for ARI Asset Management Co (ARI-AMC), a new JV-AMC formed by BAM and the Government Savings Bank. BAM is currently in the process of transferring approximately 130,000 NPL accounts totaling 11 billion baht to the new JV-AMC, emphasizing the importance of effectively managing bad loans in the current economic climate.