Kasikornbank Public Company Limited (KBANK) Earnings Call Transcript & Summary

[Foreign Language] Good afternoon, everyone. I am Kattiya Indaravijaya, CEO of KBank. Thank you for your time today. Together with me are Mr. Chongrak Rattanapian, President of KBank; and Ms. Sansana Sukhanunth, Executive Vice President and CFO of KBank. First of all, I would like to affirm our commitment to deliver sustainable value to stakeholders and double-digit ROE by 2026. Our strategy will focus on balanced growth and productivity improvement amid economic headwinds. Allow me to provide you with the brief environmental scan in Thailand. Thai economy has not fully recovered, still recovering unevenly. In 2025, we expect the economy to grow at a slower pace of 2.4%. Private consumption and export will be key drivers, but with less growth momentum, along with improved government spending. We expect 2 rate cuts, 25 basis each, bringing the rate down to 1.75%, in line with our view for the Fed actions amid economic uncertainty. Several challenges remain both internal and external, including high household debt, global economic slowdown and intense geopolitics. Next, I will take you through our financial target, the key strategy and what we will focus on this year, affirming our pathway to achieve double-digit ROE in 2026. As I mentioned, we are still committed to reach double-digit ROE in 2026. So I would like to assure you all that everything we are planning to do is to reach that target. NIM, the rate cut in late last year in November will have a full impact this year, along with the pressure from 2 more rate cuts during this year. Also, our continued focusing on quality than quantity loan growth, along with continued debt relief measures will also pressure NIM this year. So NIM in 2025 will be in the range of 3.3% to 3.5%, declining from last year, but NIM minus credit cost will continue to improve. Loan growth. Loan growth will continue to be slow this year with flat growth, still sensible in line with uneven economic recovery and our focus on selective quality growth. Loan growth this year, will mainly come from retail loan, 5% to 7%, driven by selective high-income, housing loans, and credit card. Commercial lending, both corporate and SME loans will show flat or negative growth, aligned with our focus on quality over quantity. Net fee income growth will remain strong with mid- to high single digit, driven by new strategic growth in wealth management business and selective payment solution, which I will give more details when talking about wealth and payment strategy. Cost-to-income ratio will be low to mid-40s from continuous cost management and productivity improvement. Credit cost for this year, it will reach normalized level at 140 to 160 basis points, in line with our commitment. Even reaching the normalized level, it may remain high in this cycle amid several uncertainty and headwinds. NPL ratio will be relatively stable and less than 3.25% amid uncertainty economic recovery. As our 3+1 strategic priority, which had yield several positive results last year are still the key to achieving our 2025 goals and double-digit ROE by 2026. For this year, we will continue our strong execution on 3+1 strategic priority, while also adding more focus on elevating innovation and productivity by blending advanced technology, AI and human intelligence. I will focus on how we plan to achieve our commitments, whereas touch very little on the 2024 performance result and what we have done in 2024 since you have already discussed with our CFO. The first strategic priority is credit, which we have enhanced credit capability to be more resilient. Continuing from last year, as I mentioned earlier, our focus is still on quality over quantity lending through selective, secure and existing credit products and continue to elevate end-to-end credit capability. Those action will continue improving asset quality, credit cost and NIM minus credit costs. This year, besides focusing on selective quality growth, we will reestablish SME support program, i.e., K-SME CARE and rebalance portfolio with expanding retail lending, which will be focusing on selective high-income mortgage loans and credit card. We continue to enhance end-to-end credit capability from origination to monitoring, collection and recovery by revamping loan origination to enable agile and data-driven lending decision, along with optimizing lead generation, using predictive analytics to target high potential borrowers, create tailored product program and rebalance portfolio. Leveraging proactive risk monitoring with expanding early warning sign, and deploying portfolio monitoring to flag early sign of stress and emerging portfolio risks. And enabling risk-based limit adjustment based on real-time risk indicators to ensure exposure and risk alignment. Transforming collection system with analytics and strategic process enhancements, including field collectors for high risk and high balance consumer customer, to optimize collection productivity and recovery efforts. Now come to capital-lite fee income. We will scale this capital-lite fee income through wealth and payment solution. Comprehensive products are offered with globally diversified core and satellite portfolio advisory using global strength, JPMorgan asset management and local expertise, KAsset, to improve customer stickiness. Looking forward to 2025, KBank will continue to deepen engagement and increase penetration. There are still rooms to increase penetration of wealth products, both mutual fund and bancassurance. Broaden product, sophisticated and complex investment solution. This will be offered by refining analytics insight and focusing on need-based offering. We will transform customer-centric sales and service with expert advisory, which is consists of the 2 teams, Master RM and product specialists to ensure the highest level of financial services, along with new features of Digital Wealth app, Health Buddy and K-Wealth knowledge hub to foster lifelong relationships. Also, we continue to enhancing wealth and sales effectiveness by optimizing lead coverage to target the right customers, strengthening advisory strategies and revamping digital sales tool through RM with instant customer insight and AI-assisted product offering. For payment, we continue to dominate digital payment with 30% market share with better customer experience throughout their journeys. In 2025, we will continue to boost up revenue from potential growth area, which are FX business such as “K+ Go Inter for outbound spending, new revenue in merchant business with ecosystem expansion and cross-border business. FX business show a new high record for FX fee with double-digit growth from expanding ATM and FX boost coverage in strategic area. Merchant business strengthened #1 position for fine-tuning profitability per customer. Cross-border business, low-value remittance on K PLUS, our mobile banking expand to worldwide coverage. Also focusing on cost and productivity improvement in declining fee area by migrating customer to K PLUS, strengthening and pioneering sales and service model by creating digital-first experience to deliver value-based result. In 2025, we will continue to strengthen leadership position in digital banking, while enhancing end-to-end customer digital-first experience, by improving cross-channel integration, increasing digital onboard to 63% and continuing to secure our #1 position in overall brand Net Promoter Score. To maintain the leading position in digital banking, we will also continue to expand K PLUS and K Business user. We will use sales and service model to accelerate revenue generation along with maximizing channel productivity and improving cost per transaction. This page summarizes our key achievement of 3 strategic priority: credit, capital-lite fee income and distribution channel. For +1, new revenue creation for medium term to long term consists of KIV, regional business and innovation for future growth still aim to lay foundation for future growth and will contribute around 5% of net profit in 3 to 5 years. This year, productivity has been embedded as a key corporate agenda to inspire a culture of productivity across organization. Apart from several initiatives, as mentioned in main 3+1 strategy, we also set up productivity program covering 3 key resources, including workforce productivity by optimizing the workforce with 20% productivity improvement in the next few years, along with being performance-driven organization. Technology enablement with effective business and IT alignment, including using technology to accelerate process with efficiency and cost effectiveness with refreshing technology and optimized IT application. Fixed asset optimization and operation efficiency by optimizing branch size and coverage, strategic space management in main building and optimizing the number of profitability e-machines. We also implement budget centralization to ensure efficient allocation, minimize spending and maximize resource utilization. Productivity improvement will support 3+1 strategic priority and enhance productivity ratio. Shareholders' return is one of our key focuses. Our capital management is set to ensure long-term sustainability in business resiliency and appropriate shareholder returns with 13% to 15% long-term CET1. Dividend payout in 2023 improved to around 37%, and we increased interim dividend payment in 2024 by THB 1.5. For the full year of 2024 dividend payout, please wait until we have the Board of Director meeting at the end of this month. Since we announced the K strategy last year, we have continued to focus on strong execution, prudent discipline and careful monitoring with concrete measures to walk along our pathway with confidence to achieve double-digit ROE in 2026. We will continue to execute more to achieve more with our 3+1 strategic priority, including credit capital-lite fee income, distribution channel and the new revenue source, creation laying for future growth together with elevating innovation and productivity. Those will bring improving NIM minus credit cost, high single-digit fee income growth, normalized credit costs and improving cost-to-income ratio, along with 13% to 15% long-term CET1 and appropriate and sustainable dividend payout, a pathway to achieve double-digit ROE by 2026. This year, KBank is entering the 80th year. We are driving force in Thailand's economic development for 80 years and always guide by our philosophy to ensure financial resilience throughout uncertainty and challenges by being trusted partner for stakeholders and pay attention to inclusive potential growth together. Thank you.