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

Good afternoon, everyone. I'm Kattiya Indaravijaya, CEO of KBank. Thank you very much for taking the time to join us today. I'm pleased to be here together with Mr. Chongrak Rattanapian, our President; Ms. Sansana Sukhanunth, our CFO; and our Investor Relations team. Last year marked a special milestone, our 80th anniversary, 8 decades of trust and resilience with leading position across multiple businesses. As we step into the next chapter, we are building on this strong foundation to create even greater impact for our customer, our community and the country. As we reflect on 2025, while the economic environment remains uncertain and volatile, we nevertheless executed with discipline on our 3+1 and productivity strategy. This has delivered solid and improving business momentum for KBank with our operating and financial metrics broadly on track, reflecting the resilience of our model and the ability to execute well even in a challenging environment. Looking forward, we will not only continue to advance our existing K-Strategy, but also further sharpen our customer focus across priority segments. This committed and focused execution of various operating levers within our control will further enhance our financial profile and support the enhancement of our 2026 targets. Our double-digit ROE ambition also remains intact, although the timing will continue to depend on macroeconomic conditions. On capital management, we have now utilized the full toolkits available to us, regular dividends, special dividends and share buybacks, to continue delivering sustainable total shareholder return. Our CET1 remains healthy, and we continue to manage our capital to achieve the appropriate balance between financial stability, investment for growth and shareholder returns. Finally, the recent governance enhancement that the bank had implemented are anchored on strong corporate governance principles, which we are confident will drive long-term shareholder value. Turning into the macro picture. GDP growth remained under pressure in 2025 with ongoing challenges from U.S. tariff and the slowdown in the global trade. In the near term, sluggish domestic consumption and ongoing political uncertainty are expected to continue to challenge the growth outlook. Thailand's GDP growth is expected to slow to 1.6% in 2026, pressured by weaker exports, contraction in manufacturing activity and physical constraints. Household debt continues to constrain consumption while tourism is recovering gradually. We expect one additional policy rate cut this year as our base case scenario brings the rate to around 1%. We would like to reiterate that amidst the macro backdrop, our stance remain disciplined and selective in line with our strategy to focus on quality and sustainable growth. In the face of these continued challenges, we would like to highlight that our strategy has delivered on strong progress and result in 2025. For our credit strategy, we continue to focus on secure and high-quality lending, supported by strengthened end-to-end credit processes. In 2025, 99% of new bookings came from the existing customers and 91% came from secured loan. For fee income, holistic wealth advisory and competitive bancassurance products reinforced our #1 position in mutual fund AUM with 12.9% growth and drove 17% growth in bancassurance new life premium. We also continue to lead in digital payment with opportunity across FX, merchant services and cross-border flows. Our sales and service model, our digital-first experience support our #1 position in digital payment with around 30% market share, #1 overall in brand Net Promoter Score and #1 mobile banking users with K PLUS users increasing by 1 million to reach 24.2 million in 2025. Across the organization, productivity and innovation improved through workforce optimization, improved fixed asset utilization, technology enablement and strengthening capitalized budgeting. Our 2025 financial results were also broadly in line with the expectation, reflecting the underlying resilience in our businesses as well as the continued disciplined execution of our strategy. As this detail were covered during the fourth quarter of 2025 Analyst Meeting with our CFO and the IR team, I will proceed with a recap of our strategic priority and further highlight our key priorities for 2026. As mentioned since last year, we have continued to ensure stability and resilience amid a challenging environment. This year, we will drive forward 3+1 and productivity strategy and further strengthening value creation through customer strategy while securing our balance sheet strength and delivering sustainable total shareholder returns. Our 3+1 and productivity strategy remain unchanged. But in 2026, we will introduce an enhanced customer strategy to sharpen execution and ensure we deliver the right solution to customers at the right time, creating greater value for KBank and all stakeholders. By integrating our existing 3+1 and productivity strategy with deeper data-driven insights from the customer strategy, we create truly integrated approach that we believe will deliver greater value than each strategy could achieve on its own. We have also established the way we work to support the execution of this customer-focused direction, and I will be the one who'll lead this execution. Importantly, this strategy does not operate in isolation. It is fully integrated within our existing 3+1 and productivity strategy, reinforcing the way we execute across the entire bank. As customer needs evolve, we continue to innovate and develop financial solutions tailored to every segment. Customers today expect solutions that are relevant, timely and seamlessly delivered, which is the expectation we are now addressing with even greater precision and discipline. Our deep understanding of our retail customers' needs across their life cycle will enable us to offer the right solution for our customers at the right time. We will optimize our policies to acquire higher-quality customers and expand tailored needs-based solution. We will also upgrade our RM to become trusted advisers to drive wallet share and lifetime value gains. For our SME customer, we will provide need-based credit and noncredit solutions with trusted advisers, unlocking the strength of our ecosystem to offer sector-fit credit and solutions across customer value chain tailored to SME life cycle needs. For corporate customers, we will deliver solutions aligned with each customer's ecosystem, supporting both their domestic and cross-border ambitions. We will leverage our strength in payment and transactions to support corporate needs and enhance sector-specific service model to deepen strategic partnership. Along with those, we will also strengthen AI and data analytics to deliver personalized solutions at the right moment across digital-first journey. Now let us move to the part that everyone has been waiting for, our 2026 financial targets. NIM is expected to be in the range of 2.75% to 2.95%, reflecting full year's impact of multiple rate cuts last year, our base case scenario of one more rate cut this year. We continue to focus on the quality over quantity in loan growth, together with ongoing debt relief measures. We will continue to actively manage liquidity to mitigate pressure from interest rate down cycle. Loan growth will remain slow this year at 0 to 2%, still sensible, in line with a sluggish economic recovery and our continued focus on selective quality growth. We remain focused on secured lending and selective expanding with high-potential customer segment while leveraging strengthened credit capability to support end-to-end credit performance. Loan growth this year will mainly come from retail segment driven by housing loan. Net fee income growth will remain strong at mid- to high single digit driven by scaling wealth management solutions and strengthening leadership in domestic and cross-border payment. Cost-to-income ratio will be at the mid-40s with further reinforced cost efficiency and productivity improvement to mitigate the impact of slowing revenue growth. In 2025, we executed several quick-win initiatives, including workforce and personnel expenses optimization, special early retirement program and shifting the compensation mix towards a higher variable pay, improved fixed asset utilization, branch resizing, technology enablement as well as strengthening centralized budgeting. These have reflected in enhanced productivity ratio, including improved in-human capital ROI and channel cost per transaction. The productivity initiatives we implemented together with our ongoing IT operational efficiency efforts will translate into tangible cost discipline this year and beyond, mitigating the impact of revenue pressure from interest rate cycle. Credit costs. We continue our prudent and cautious policy with credit costs maintained at a normalized level, 140 to 160 basis points. It may remain high in this cycle amid several uncertainty and headwinds. NPL ratio. With our proactive asset quality management and continued emphasizing on quality lending, NPL ratio will be relatively stable at less than 3.25% amid uncertain economic condition. Capital management. We remain prudent in our approach with careful consideration around capital adequacy buffer for financial stability to weather the uncertain economic environment and investment to support business growth when the tide turns. Our capital position remain resilient, and we continue to secure our balance sheet strength with a medium-term target CET1 ratio at above 15%. CET1 at the end of 2025 was at 18%. Our capital management journey reflects consistent effort and disciplined execution to enhance capital efficiency and deliver sustainable shareholder return. As you can see from the slide, we have implemented a spectrum of capital management options, including dividend payout, special dividend and share buyback program. 2024 dividend payout improved to around 47%. And if we include the special dividend of THB 2.5 per share, the total dividend payout was 58%. 2025 interim dividend also improved to THB 2 per share from THB 1.5 per share in the previous year. Our second share buyback program is progressing towards our target of 2% of total shares, utilizing up to THB 8.8 billion by May this year. With this tool, we have now deployed the full capital management toolkit available to us, regular dividend, special dividend, share buyback, to continue delivering sustainable total shareholder return. This action not only reflects our strong track record for enhancing shareholder return over time, but also reflect our disciplined execution and strong commitment to long-term value creation. Our full year 2025 dividend payout is pending Board approval later this month. At KBank, governance is led by our Board of Directors with management executing strategy within a clear oversight framework anchored on transparency, independence, responsibility, sustainability, fairness, accountability and integrity. This foundation enables the disciplined execution and sustainable performance through the cycle, which we believe that will drive long-term shareholder value over time. We expect that as we continue to execute our strategy, together with our new enhanced customer strategy, we will be able to deliver sustainable financial outcome and further reinforce our position as the market leader. Strategy matters, but what truly makes the difference is the execution. We are not only strengthening our operational excellence but also creating sustainable value for all stakeholders, including resilient and long-term total shareholder return. The real challenge is not what we aspire to be, but how decisive we act to get there. This requires more than isolated initiatives, moving together towards a shared direction and delivering meaningful outcomes. The management team and Board of Directors continue to work closely together to ensure disciplined execution and consistency with our commitment to total shareholder return. We have already demonstrated this through solid improving business momentum, and we look forward to showing you even more concrete progress later this year. Thank you again for your time today. We appreciate your ongoing support for KBank, and look forward to speaking with you again as we execute against our strategy in 2026.