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For further information, please contact the Investor Relations Unit or visit our website at www.kasikornbank.com
KASIKORNBANK
Investor Presentation as of 4Q15
March 2016
2
Consolidated (as of December 2015)Assets Bt2,555bn (USD70.8bn) Ranked #4 with 14.5% market share** Loans* Bt1,610bn (USD44.6bn) Ranked #4 with 14.6% market share** Deposits Bt1,705bn (USD47.3bn) Ranked #4 with 15.3% market share** CAR 18.00% ***ROE 14.54%ROA 1.60%Number of Branches 1,120Number of ATMs 9,349Number of Employees 21,484
KASIKORNBANK at a Glance
Share InformationSET SymbolShare Capital: Authorized Bt30.5bn (USD0.8bn) Issued and Paid-up Bt23.9bn (USD0.7bn)Number of Shares 2.4bn sharesMarket Capitalization Bt360bn (USD10.0bn) Ranked #2 in Thai banking sector 4Q15 Avg. Share Price: KBANK Bt169.81 (USD4.71) KBANK-F Bt170.38 (USD4.72)EPS Bt16.49 (USD0.46)BVPS Bt119.42 (USD3.31)
KBANK, KBANK-F
Established on June 8, 1945 with registered capital of Bt5mn (USD 0.14mn) Listed on the Stock Exchange of Thailand (SET) since 1976
Notes: * Loans = Loans to customers less Deferred revenue
** Assets, loans and deposits market share is based on C.B.1.1 (Monthly statement of assets and liabilities) of 14 Thai commercial banks as of December 2015
*** Capital Adequacy Ratio (CAR) has been reported in accordance with Basel III Capital Requirement from 1 January 2013 onwards.CAR is based on KASIKORNBANK FINANCIAL CONGLOMERATE. KASIKORNBANK FINANCIAL CONGLOMERATE means the company under the Notification of the Bank of Thailand re: Consolidated Supervision, consisted of KBank, K Companies and subsidiaries operating in supporting KBank, Phethai Asset Management Co., Ltd. and other subsidiaries within the permitted scope from the BOT’s to be financial conglomerate
Exchange rate at the end of December 2015 (Mid Rate) was Bt36.09 per USD (Source: Bank of Thailand)
3
Table of ContentsTopic Slide Page
Operating Environment 5 - 6
2016 Financial Targets 7
Composition of Growth 8 - 11
The K-Strategy 12 - 13
Capital and Dividend 14 - 15
Summary 16
Appendix 17 - 134
4
Topic Slide Page KBank
Strategic IssuesStrategy and Segment HighlightsRisk and Credit Management Financial Performance
18-2425-3738-4344-68
• 2015 Highlights• Net Interest Margin• Interest Income - net• Non-interest Income• Net Fee Income• Net Premium Earned - net• Other Operating Expenses• Loan• Asset Quality• Investment in Securities and Funding Structure
45-48495051
52-535455
56-5960-6465-68
The wholly-owned subsidiaries Muang Thai Life Assurance (MTL) Other Information
69-7677-8485-91
Banking System and Regulations Update 92-99
Government Policy 100-110
Thai Economic Figures 111-132
IR Contact Information and Disclaimer 133-134
Appendix
5
Key Points:
Risk Factors:
Operating Environment: Economic Outlook for 2016 Key GDP Forecasts and Assumptions
0.9
2.8 2.5-3.5
0.0
3.0
6.0
2014 2015 2016F
% Y
oY
Slow recovery momentum of Thailand’s major trading partners, especially China
Drought situation in Thailand and in food producing countries
Progress of government budgetary disbursement and investment plans
Capital volatility and monetary policy responses
Geopolitical Risk
% YoY
RangeBase Case
GDP 0.9 2.8 2.5-3.5 3.0
Private Consumption 0.6 2.1 1.7-2.5 2.1
Total Investment -2.6 4.7 4.0-5.2 4.6
Gov't Budget Deficit (% of GDP) -2.9 -3.0 -3.2 to -2.6 -2.9
Exports (Customs Basis) -0.4 -5.8 0.5-3.5 2.0
Imports (Customs Basis) -9.0 -11.0 3.5-7.5 5.5
Current Account (USD bn) 15.4 34.8 21.6-24.5 23.0
Headline Inflation 1.9 -0.9 0.0-0.8 0.4
Policy Interest Rate** 2.00 1.50 1.25-1.50 1.50
2016 F*
2014 2015
* 2016 GDP forecast as of February 15, 2016** At the latest Monetary Policy Committee (MPC) meeting on February 3, 2016, the Policy Interest Rate was 1.50%
2015 GDP grew at 2.8%
Thai economy is expected to grow at 3.0% in 2016
2016 growth will likely be driven by government and private investment
Exports will benefit from stabilized commodity prices; domestic spending will likely see improvement following government stimuli
Notes:
Source: KResearch and **KBank Capital Markets Research (as of February 15, 2016)
6
Outlook Possible Impacts to Thai Economy
Global Economy Global economy: recovery remains subpar amidst rising uncertainties US: economic recovery continues; gradual increases expected in Fed
funds rate will not derail economic recovery Eurozone: weak economic recovery amidst lingering political uncertainties China: lukewarm economic growth, but more stimuli measures expected
from China’s government to prevent a hard-landing situation ASEAN economies: growth will be stuck in low gear due to China’s
economic slowdown
Pressure on export growth expected, due to weak global demand
Weak global commodity prices will continue to limit upside in agricultural prices
Government Stimulus Plan (App. pages 100-110)
Accelerating investment in transport infrastructure projects and economic stimuli since September 2015, including measures to boost the economy at the village and district levels as well as those designed to help SMEs
Bring hope for a pick up in growth momentum Improve private consumption and investment stimuli
Inflation (App. pages 113 and 116)
Low inflation, due to limited upside in oil prices Not a deflation, inflation expectation remains “well-anchored”
Policy rate is expected to remain accommodative to economic growth throughout 2016
Exports and Tourism(App. pages 115 and117-118)
Improvement in export growth expected, following more stabilized commodity prices. However, challenges from slow global economic recovery (especially China), non-tariff measures by trade partners, and structural issues such as changing consumer demand toward certain products will slow recovery of some products
Due to a high base effect, growth in the number of tourist arrivals could slow from 2015 before reaching normality
Tourism will play a major role in boosting 2016 economic growth
Fed Policy Normalization(App. pages 123-124)
Monetary policy normalization is on the way Fed funds rate will rise gradually, attuned to US economic development
Modest impacts on Thai economy, given ample domestic liquidity as well as strong external balances
Baht (App. pages 112) Depreciating Thai Baht expected, due to US monetary policy normalization and, thus, more possibility of foreign fund outflows
Adjustment of foreign investors’ position in Thai stock, bond, and money markets
Weakening Thai Baht helping some Thai exports
Operating Environment: Economic Outlook for 2016
Source: KResearch and KBank Capital Markets Research (as of February 15, 2016)
7
Consolidated 2015 Actual 2015 Targets 2016 Targets Notes
ROE 14.54% N/A N/A
ROA 1.60% N/A N/A
NIM 3.67% 3.5-3.7% 3.4-3.6%Ranking maintained among large commercial banks (Page 49)
Loan Growth 5.42% YoY ~ 6% 6-7%Decent and sustainable loan growth; in line with economic growth; subject to the success of government measures (Page 8 and 56-59)
Non-Interest Income Growth** 12.57% YoY Low teens Up to 10% Sensible growth reflects large base effect; in line with the economy (Page 9 and 51-54)
Non-Interest Income Ratio 42.37% About 40% About 40%
Cost to Income Ratio*** 45.19% 45.0 – 47.0%* 45.0 – 47.0%Cost to income ratio will range between 45-47%; seasonally higher in 2H (Page 11)
Credit Cost per year (bps) 168 bps Up to 170 bps* Up to 170 bps Prudent (Page 10 and 61)
NPL Ratio (Gross)**** 2.70% About 2.8%* 3.5-3.6% Manageable (Page 10 and 60)
* Forecast as of October 2015** Non-Interest Income includes Net Premium Earned - net (Net Premium Earned less Underwriting Expenses) from Muang Thai Life Assurance PCL (MTL); KBank has a 38.25% economic interest in MTL; on the
consolidated basis, Bancassurance fees are not included in net fee income, due to the elimination of inter-company transactions (the accounting treatment from the Muang Thai Group Holding consolidation); Non-Interest Income = Total Operating Income – net less Interest Income – net
*** Cost to Income Ratio = Total Other Operating Expenses to Total Operating Income – net (Total Operating income less Underwriting Expenses)**** NPL Ratio (Gross) = NPL (gross) to total loans; NPL (gross) used in the calculation are loans to general customers and loans to financial institutions that are non-performing loans; total loans used in the
calculation are loans to general customers and loans to financial institutions
2016 Financial Targets
Note:
8
Composition of Growth: Loans by Business
Note: Since 1Q13, as per the Bank of Thailand’s requirement, the Bank has complied with TFRS 8 (Operating Segments) to present operating results for each key segment in financial reports
Loan Definition (more details on loans can be found in App. page 57-58)Corporate Loans: Loans of KBank and KBank’s Subsidiaries in Corporate Segments (Annual sales turnover > Bt400mn)SME Loans: Loans of KBank and KBank’s Subsidiaries in SME Segments (Annual sales turnover ≤ Bt400mn)Retail Loans: Loans of KBank and KBank’s Subsidiaries in Retail SegmentsOther Loans: Loans in Enterprise Risk Management Division (NPL + Performing Restructured Loans) and other loan types
Moderate loan growth momentum in line with full-year targetLoan Portfolio Loan Portfolio Structure
* December 2014 loan base is not comparable with previous reports, due to customer migration to larger segments and changes to comply with TFRS 8
Bt bnConsolidated Y2015 2015
Dec 14* Dec 15 Loan Growth Yield Range(%YTD) (%)
Corporate Loans 456 468 2.7% 3-5% SME Loans 572 618 8.0% 6-8% Retail Loans 408 422 3.5% 5-7% Other Loans 91 102 11.6% Total Loans 1,527 1,610 5.4% 6.1%
5-7%
6-7%
Amount (Bt bn) 2016Loan Growth Target (%)
4-6%5-7%
7% 6% 6% 6%26% 27% 27% 26%36% 36% 37% 38%31% 31% 30% 29%
0
400
800
1,200
1,600
2012 2013 2014 2015
Corporate
SME
Retail
Others
1,327 1,5271,439 1,610
2015 2016 Outlook
Corporate Loans Mainly from commerce, real estate and industrial agriculture
Growth target on large public/private investment projects Focused infrastructure related industries, e.g. construction, construction
materials, telecommunication
SME
LoansMainly from short-term domestic credits from agriculture,
construction materials, commerce, and automotive and parts
Growth target reflects domestic consumption demand and international trade benefits of the FTA and AEC Focus industries: construction, construction materials, and hardware
Retail
LoansMainly from mortgage loans; steady growth in line with industry;
proactively monitoring loan portfolio quality
Conservative growth target in line with industry; maintain leading market position in key products Focus on qualified customers with acceptable risk; proactively monitor and
control loan portfolio quality
9
15%2%2%
16%18%
61%
60%
0
10
20
30
40
50
60
70
2011 2012 2013 2014 2015
Other Operating Income
Fee and Service Income - net
Net Premium Earned - net
Dividend Income
Share of Profit from Investments on EquityMethod
Gain on Investment
Gain on Trading and FX transactions
4%
0.04% 2%
12%2%
20%
61%
0.4%
14%
3%
2%
0.05% 2%
61%
21%
60%
2%
2%2% 1%
38% 39% 39% 40%42%
23% 23% 24% 24% 25%
0
10
20
30
40
50
2011 2012 2013 2014 2015
Non-interest Income Ratio Net Fee Income Ratio
20.6424.47
28.81
0
10
20
30
40
2011 2012 2013 2014 2015
(Bt bn)
Note:
62% 61% 61% 60% 58%
38%39%
39% 40%42%
0
50
100
150
2011 2012 2013 2014 2015
Non-interest Income Net Interest Income
(Bt bn)
December 2015 (Consolidated)
Total Operating Income - net
Non-interest Income Net Fee Income
(+13%)(+19%)
Non-interest Income Ratio and Net Fee Income Ratio
90.51104.31
(+20%)(+15%)
- Non-interest Income Ratio = Non-interest Income/Total Operating Income - net - Net Fee Income Ratio = Net Fee Income / Total Operating Income - net- Net Premium Earned - net = Net Premium Earned less Underwriting Expense
(%)
120.32(+15%)
(+18%)
Composition of Growth: Net Fees and Non-interest Income
- The Bank and its subsidiaries have adopted TFRIC13: Customer Loyalty Programmes since January 1, 2014 onwards and restated the comparative financial statements and financial ratios. There is no effect on net profit of the Bank and its subsidiaries
34.0240.72
47.52
(+20%)
(+17%)(+20%)
138.66(+15%)
(+17%)55.52
0.2%
11%
(+18%)33.94
3%
147.52
37.53(+11%YoY)
(+6%YoY)
(+13%YoY)
20%
14%
2%0.2%
2%
Non-interest income growth continues to be a main driver helping to achieve long-term sustainable profitability, mainly from net fee income as a result of customer-centric strategy
2015 non-interest income accounted for 42% of total net operating income and net fee income accounted for 25%; non-interest income rose 13% YoY, mainly from net fee income, and revenue from money market and capital market products
Net fee income rose 11% YoYmainly from mutual fund business, card related fees, and transaction services
2016 non-interest income growth will be up to 10%, in line with the economy and result of large base
62.50
10
5.1
15.9
42.0
31.7
23.5
6.854.44 3.09 3.76 2.91 2.45 2.16 2.11 2.24 2.7044
287
723
888
14
83 82 93 102 66 64 66 85 96168
0
5
10
15
20
25
30
35
40
45
1996 1997 1998 1999 2000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-100
100
300
500
700
900
NPL ratio Credit Cost
2.3
16.8
44.150.6
0.75.4 5.9 7.8 9.4 6.7 7.3 8.4
11.7 14.2
26.4
048
1216202428323640444852
1996 1997 1998 1999 2000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
December 2015 (Consolidated)Asset Quality and Impairment Loss of Loans and Debt Securities (Provision)
(bps)
(%)
Notes: * Data in 1996-1997 is KBank only; ** NPL ratio in retail business, excluding 180 dpd (days past due) of credit card and consumer loans for peer comparison
(%)
Coverage RatioProvision
NPL Ratio and Credit Cost
(Bt bn)
34.725.4
30.034.2
48.8
71.073.9
88.491.6
111.0
127.1131.8134.5
141.4130.0
0
50
100
150
1996 1997 1998 1999 2000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
During 1997 Asian Crisis*
During 1997Asian Crisis*
During 1997 Asian Crisis*
NPL was peak at 42.3% in 1Q99
Asset quality remains manageable
2015 NPL ratio was at 2.7%, with a coverage ratio of 130.0%
2015 credit cost was 168bps, prudent and aligned with the macro environment and credit cycle
2016 asset quality is expected to remain manageable
NPL Ratio by Business 2014 1H15 9M15 2015
Corporate Business <2% <2% <2% <2%
SME Business <3% <3% ~3% ~3%
Retail Business** <2% <2% ~2% ~2%
11
2.63 2.47 2.39 2.63 2.70
0
2
4
6
2011 2012 2013 2014 2015
47.53 45.00 43.44 44.30 45.19
010203040506070
2011 2012 2013 2014 2015
Cost to Income Ratio
(%)
Cost to Income Ratio Cost to Average Assets Ratio
(%)
December 2015 (Consolidated)
* * *
Note: * The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards and restated the comparative financial statements and financial ratios. There is no effect on net profit of the Bank and its subsidiaries
2011 2012 2013* 2014 2015 1Q15 2Q15 3Q15 4Q15Cost to Income Ratio (%) 47.53 45.00 43.44 44.30 45.19 42.52 42.24 41.62 54.55
Cost to Average Assets Ratio (%) 2.63 2.47 2.39 2.63 2.70 2.54 2.56 2.45 3.11
Cost to income ratio ranging in the mid-40s; seasonally higher in 4Q
2015 cost to income ratio was 45.19%
2016 cost to income ratio will range between 45.0 – 47.0%
12
The K-Strategy
Strategic Capabilities
PRODUCT & SOLUTIONInnovate & be responsive
PRODUCT & SOLUTIONInnovate & be responsive
SERVICE QUALITYExcellent customer experience
at all channels
SERVICE QUALITYExcellent customer experience
at all channels
BRANDING & MARKETINGClear & consistent communication
BRANDING & MARKETINGClear & consistent communication
Customer Centricity
Customer Strategy
4 Product Domains8 Customer Segments*
The Way We Work
Long-Term Risk-Adjusted Sustainable Profitability
TO BE CUSTOMERS’ MAIN BANK
Innovation & Product Management
Understanding Customer Needs
Sales & Service Excellence
Proactive Risk Management
KASIKORNBANK, its wholly-owned subsidiaries, and its strategic ownership
I N T E G R A T I O N
Note: * The definition of the eight customer segments can be found in App. page 27
+
13
Segment Performance Highlights
Overall Customer Satisfaction
Overall Customer Satisfaction ****
*** Customers in Retail Business Division (RBS) account for 94%, SME Business Division (SME) 6%, and Corporate Business Division (CBS) less than 1% of customer portfolio
No. of Customers (mn) ***
Performance improvement driven by the success of our customer-centric strategy and new IT capabilities No. of customers grew 94% since 2007
Overall Customer Satisfaction was at 86 in Y2014
No. of customers, as of December 2015, rose to 13.4mn from 12.6mn in Y2014, a growth of 6.0%
2.89 2.89
1.69
2.80
2.15
2.632.78 2.81
2.71
1
2
3
2007 2008 2009 2010 2011 2011(New)
2012(New)
2013(New)
2014(New)
30%
20%
24%27%
26%26%25%24%
17%23%
29%
24%
27% 27%28% 29%
18%
14%
12%11%10%
5%
10%
15%
20%
25%
30%
2008 2009 2010 2011 2012 2013 2014
Average Product Holdings per CustomerMain Bank Status*
** In 2012, the Average Product Holding calculation is adjusted in all eight customer segments to align with our better understanding of customer behavior; 2011 numbers were restated for comparison purposes
Old Definition New Definition**
(Overall)
(By Business Division)
Corporate Business
SME Business
Retail Business
Main Bank Status and Market Penetration on track with our customer segment aspirations
Average product holdings per customer increasing as a result of enhanced cross-selling capabilities
Overall average rose to 2.89 in 2014, from 2.71 in 2011
2.172.66 2.82 2.862.67
3.12 3.11 3.30 3.54
4.67 4.69
2.882.872.722.78
1.71
3.023.123.05
2.562.142.122.101.831.44
4.41 4.59
0
5
10
2007 2008 2009 2010 2011 2011(New)
2012(New)
2013(New)
2014(New)
Retail Business SME Business Corporate Business
* Main Bank Status = % of customers in the market who use KBank and its wholly-owned subsidiaries as their main operating bank and/or main savings and investment bank and/or main borrowing bank; the Main Bank Status of Retail Business in 2013 and 2014 includes two out of four retail customer segments (Middle Income and Mass), which account for 99% of retail customers
**** Overall Customer Satisfaction Index calculated using the weighted average of each segment of the customer satisfaction index; the Customer Satisfaction Index in 2013 and 2014 includes only SME businesses and two out of four retail segments (Middle Income and Mass)
6.9 7.5 8.0 9.0 10.0
10.911.7
12.6
13.4
83 85 85 86 8685 85 86
0
20
40
60
80
100
0
5
10
15
2007 2008 2009 2010 2011 2012 2013 2014 2015
No. of Customers (mn) Overall Customer Satisfaction
14
14.5313.49
9.57 10.4412.57
5.203.84
0
3
6
9
12
15
18
2011 2012 2013 2014 2015
Tier1 Tier2
(%)
13.41
15.64 15.78
3.21
17.31
3.82
18.00
9.6310.43 12.02 12.88
13.79
4.185.55 3.23
3.60
0
3
6
9
12
15
18
2011 2012 2013 2014 2015Tier2 Tier1
(%)
13.81
15.9815.25
(%)
13.81
15.9815.25
(%)
13.81
15.9815.25
(%)
13.81
15.9815.25
(%)
13.81
15.9815.25
(%)
13.81
15.9815.25
(%)
13.81
15.9815.25
(%)
13.81
15.9815.25
Bank only KASIKORNBANK FINANCIAL CONGLOMERATE*
Capital (Reported Number: Excluding Net Profit of Each Period)
Capital adequacy remains sufficient to support business growth; maintained adequate Tier 1 ratio, as required under the Basel III**
December 2015
Under Bank of Thailand regulations, net profit in the first half of the year is to be counted as capital after approval by the Board of Directors as per the Bank’s regulations. Net profit in the second half of the year is also counted as capital after approval of the General Meeting of Shareholders. However, whenever a net loss occurs, the capital must be immediately reduced accordingly.
Note: * KASIKORNBANK FINANCIAL CONGLOMERATE means the company under the Notification of the Bank of Thailand re: Consolidated Supervision, consisted of KBank, K Companies and subsidiaries operating in supporting KBank, Phethai Asset Management Co., Ltd. and other subsidiaries within the permitted scope from the BOT’s to be financial conglomerate.
** The details on Basel III regulations can be found in App. Page 95-96
Basel II Basel III Basel II Basel III
2011 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15
Bank onlyCAR (%), excluding net profit of each period 13.81 15.98 15.25 16.76 17.39 16.49 16.83 17.07 17.39Tier 1 (%), excluding net profit of each period 9.63 10.43 12.02 12.88 13.79 12.61 13.10 13.84 13.79
KASIKORNBANK FINANCIAL CONGLOMERATE*
CAR (%), excluding net profit of each period 13.41 15.64 15.78 17.31 18.00 17.01 17.39 17.73 18.00Tier 1 (%), excluding net profit of each period 9.57 10.44 12.57 13.49 14.53 13.20 13.77 14.61 14.53
Basel IIIBasel II
16.7617.39
3.473.88
15
0.0
1.0
2.0
3.0
4.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(Bt) 4.00
21.36
30.5531.88 32.33
42.4932.14
27.00
22.12 22.32 22.51
27.83
01020304050
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(%)
Dividend
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Dividend Per Share (Bt) 1.75 2.00 2.00 2.50 2.50 2.50 3.00 3.50 4.00 4.00
Dividend Payout Ratio (%) 30.55 31.88 32.33 42.49 32.14 27.00 22.12 22.32 22.51 27.83
Dividend Payout RatioDividend Per Share
1.251.75
2.00 2.002.50
Interim Dividend
2.50 2.503.00
3.504.00
Dividend policy: both operating results and long-term returns to shareholders are taken into consideration in determining dividend payments
Dividend payout ratio ranges 20-25%, in order to ensure a sustainable and adequate capital level through the changing economic environment and the ongoing adoption of Basel III
16
Summary Customer-centric strategy effectively executed: data-mining, analytic
campaign management, multi-channel sales and services, and digital technology platforms have enhanced our capability to quickly acquire new customers; the result is a top-notch total customer experience, strong market position, and sustainable business performance
Balanced growth: loans to grow carefully in line with economic conditions; appropriate liquidity maintained; manageable asset quality supported by strong risk management capabilities; appropriate loan loss reserves; sensible non-interest income growth; manageable cost to income ratio; appropriate ROE maintained
Adequate capital: maintained adequate Tier 1 ratio, as required under Basel III
Sustainable Development: embraced as an integral part of business operations, with the belief that corporate strength and sustainability are achieved through responsibility to the economy, society, and environment
17
Appendix
18
KBank: Strategic Issues
19
Cost Effectiveness
1) Fixed Asset Investment Improve asset utilization
(e.g. office space, IT equipment)
Tighten approval process for new assets
2) Other Expenses Focus on strategic sourcing
Align marketing communication activities to ensure marketing effectiveness
1) Human Resources Management Redeploy work processes between front
and back office
Improve revenue per head
2) Branch Profitability
Revisit branch & ATM optimization and profitability, including account planning, area planning, and branch relocation
High cost growth period incurred from investing in new IT business capabilities and channel infrastructure is passed; K-Transformation project was completed in July 2015; channel expansion has reached coverage satisfaction
Cost and productivity management will be addressed in:
Cost Management Productivity Management
20
Establishment of KASIKORN BUSINESS – TECHNOLOGY GROUP
Note: - KASIKORN BUSINESS – TECHNOLOGY GROUP established with 5 companies, as a wholly-owned subsidiary of KASIKORNBANK; included in the KASIKORNBANK FINANICIAL CONGLOMERATE, as approved by the BOT in October 2015- Registered capital in each company at Bt5mn, except for KASIKORN SERVE at Bt10mn- KASIKORN SERVE changed names from PROGRESS SOFTWARE COMPANY LIMITED; established in March 1993
Idea Creation Software Development to Support Innovation and Business Requirements
Control Infrastructure Resources for the Change, the Run, and the Gone
Center of Excellence for Technical Resource Pool and Service*
A Bridge between KBank and KASIKORN BUSINESS – TECHNOLOGY GROUP Group’s Control Structure
Enable Seamless Integration
Create the Future Generate Business Value Ensure Service Continuity Deliver Service Excellence
Chairman of KASIKORN BUSINESS – TECHNOLOGY GROUP
Mr. Teeranun Srihong
Vice Chairman of KASIKORN BUSINESS – TECHNOLOGY GROUP
Mr. Somkid Jiranuntarat
21
Asset-light Regional Expansion intoStrategically focusing on AEC+3 markets, KBank pursues an integrated regional operating model: physical footprint, digital platform, and regional partnerships
Partnership
Digital Platform
X-border Retail Payment
X-border THB Direct Settlement
X-border Multi-Currency Settlement
…and others
Physical Footprint
AEC
+3
Lao PDR. Cambodia Myanmar Vietnam Indonesia Japan Korea China
AEC
+3
Note: - One subsidiary bank: KASIKORNTHAI BANK Limited, commercial banking business in Lao PDR- Five international branches: Los Angeles, Cayman Islands, Hong Kong, Shenzhen, and Chengdu- One international sub-branch: Longgang (Longgang District, Shenzhen)- Nine representative offices: Beijing, Shanghai, Kunming, Tokyo, Yangon, Ho Chi Minh, Hanoi, Phnom Penh, and Jakarta- Global partners with 73 banks in 11 countries: 51 Japanese partner banks; 2 Korean partner banks; 3 European regional banks
(in Germany and Italy); 7 ASEAN partner banks (in Lao PDR, Vietnam, Cambodia, Indonesia, Malaysia, and Philippines); and 10 Chinese partner banks (as of December 2015)
22
Regional BankKBank aims to facilitate cross-border trade, investment, and settlement in the AEC+3 economies through 6 business frontiers
RegionalCross-BorderBusinesses
Integrated Operating ModelBusinessFrontiers
Note: *Target markets only. In other markets, partnership model is applied.LII = Locally Incorporated Institution
Current Banking Platform Future Banking Platform (in 2016 -2017)
AlipayPayment
WingsTransfer
LII Rep. Office
Cross-Border Mobile
Transfer
Banking Agent Model
Cross-Border Direct Settlement
Branch Multicurrency
Cross-Border Direct Settlement
Branch
TradeA
InvestmentB
Settlement
C
Cross-Border Mobile Transfer
Thai Direct Investment
1
BranchHost Country
2
Foreign DirectInvestment
3
International Trade
4
Border Trade
5
Cross-borderRetail
6
LII
RMB Settlement
Partnership
AEC* +3
Regional Payment & SettlementLao PDR. Cambodia Myanmar Vietnam Indonesia Japan Korea China
Physical Footprint
Digital Platform
Collaborations with FinTech
23
Executives Team
Chairman of the Board and Chief Executive Officer
Co-President and Chairman of KASIKORN BUSINESS-TECHNOLOGY GROUP
Mr. Teeranun Srihong
Mr. Banthoon Lamsam
Co-President
Ms. Kattiya Indaravijaya
Co-President
Mr. Predee Daochai
24
Board of Directors Structure: 17 Board Members
• Prof. Khunying Suchada Kiranandana, Vice Chairperson, Lead Independent Director, and Chairperson of the Human Resources and Remuneration Committee
• Prof. Dr. Yongyuth Yuthavong, Chairman of the Corporate Governance Committee**
• Prof. Dr. Pairash Thajchayapong
• Sqn. Ldr. Nalinee Paiboon, M.D.
• Mr. Saravoot Yoovidhya
• Dr. Piyasvasti Amranand, Chairman of the Audit Committee
• Mr. Kalin Sarasin
• Ms. Puntip Surathin
• Mr. Wiboon Khusakul• Ms. Suphajee Suthumpun
Executive Directors (4)
• Ms. Sujitpan Lamsam, Vice Chairperson and Chairperson of the Risk Management Committee**
• Dr. Abhijai Chandrasen, Legal Adviser
• Mr.Sara Lamsam (New Appointment)*
Independent Directors (10)
Non-Executive Directors (3)
• Mr. Banthoon Lamsam, Chairman of the Board and Chief Executive Officer
• Mr. Predee Daochai, President
• Mr. Teeranun Srihong, President
• Ms. Kattiya Indaravijaya, President (New Appointment, Former CFO)*
• Prof. Khunying Suchada Kiranandana, Vice Chairperson, Lead Independent Director, and Chairperson of the Human Resources and Remuneration Committee
• Prof. Dr. Yongyuth Yuthavong• Prof. Dr. Pairash Thajchayapong
• Sqn. Ldr. Nalinee Paiboon, M.D.
• Mr. Saravoot Yoovidhya
• Dr. Piyasvasti Amranand, Chairman of the Audit Committee
• Mr. Kalin Sarasin
• Ms. Puntip Surathin
• Mr. Wiboon Khusakul• Ms. Suphajee Suthumpun
Executive Directors (3)
Independent Directors (10)
Non-Executive Directors (4)
• Mr. Banthoon Lamsam, Chairman of the Board and Chief Executive Officer
• Mr. Predee Daochai, President
• Mr. Teeranun Srihong, President
• Mr. Krisada Lamsam, Vice Chairman and Chairman of the Corporate Governance Committee (Resigned)
• Ms. Sujitpan Lamsam• Dr. Abhijai Chandrasen, Legal Adviser• Mr. Somkiat Sirichatchai, Chairman of the Risk Management Committee
(Resigned)
New Former
* Effective from January 1, 2016 ** Effective January 28, 2016
25
KBank: Strategy and Segment Highlights
26
KBank Digital Strategy
KBank Digital Strategy
To use Digital Technology and Data to enhance business performance by transforming:
Customer Experience
Operational Processes
Business Model
Customer Understanding Customer Offering & Interaction Sales & Service Channels
Process Digitization Worker Enablement Data-driven Execution
Digitally-enabled Product & Services
New Digital Business
KBank Market Position in Digital Banking
Corporate & SME Customers
Retail Customers
Best Cash Management Bank in Thailand (2015): The Asian Banker Thailand Domestic Cash Management Bank of the Year: Asian Banking & Finance Triple A Cash Management Bank in Thailand and Triple A Trade Finance Bank in
Thailand: The Asset Straight Through Process Award: Deutsche Bank
% Market Share (KBank Digital Banking Users)* Number of Transactions
1,135
723
423
-
400
800
1,200
2013 2014 2015
(+69% YoY)
(+71% YoY)
Note: * KBank Digital Banking Users to Total Digital Banking Users in Thailand (Internet and Mobile Banking) Source: The Bank of Thailand
% Market Share and Number of Transactions (Retail Customers)
KBank Market Position in Digital Banking
(+57% YoY)39%38%37%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
2013 2014 9M15
(Million Transactions)(%)
#1 Market share of Thailand Digital Banking users (BOT report, September 2015) #1 Top Mobile Banking Application in Thailand (57%) from Priceza.com 2015
(Data collection from Google Play Store, Apple App Store and App Annie) #1 Digital Banking Top of Mind Brand perception rating (Nielsen, 2014)
27
Eight Customer Segments Multi-Corporate Business
Large Corporate Business
Medium Business
Small & Micro Business
High Net Worth Individual
Co
rpo
rate
B
usi
nes
sS
ME
B
usi
nes
sR
etai
l Bu
sin
ess
Ret
ail
Bu
sin
ess
Company with annual sales >Bt5,000mn
Company with annual sales >Bt400mn to Bt5,000mn
Individual or company with annual sales >Bt50mn to Bt400mn
Individual or company with annual sales ≤ Bt50mn, and with commercial credit limit ≤ Bt15mn
Individual wealth with KBank and its wholly-owned subsidiaries* ≥ Bt50mn
Individual wealth with KBank and its wholly-owned subsidiaries*≥ Bt15,000 to < Bt10mn
Individual wealth with KBank and its wholly-owned subsidiaries* < Bt15,000
Note: * Wealth with KBank and its wholly-owned subsidiaries is defined as savings and investments, such as deposit products with KBank, mutual funds with KAsset; or the monthly income of an individual customer
Affluent
Middle Income
Mass
Individual wealth with KBank and its wholly-owned subsidiaries*≥ Bt10mn to < Bt50mn
Customer-centric strategy: offering a full array of financial solutions and a satisfying experience to our customers Synergistic portfolio management by monitoring eight customer segments Offer financial solutions from among KBank, its wholly-owned subsidiaries, and the insurance company Make significant progress towards long-term aspirations; performance on track
28
Revenue by Eight Customer Segments
Note: Loan portion and loan yield of each customer segment includes loans from the Enterprise Risk Management Division (NPL + Performing Restructured Loans); figures are not comparable with loan data in other pages
Non-interest income *Loan
Portion
Average
Loan Yield (%)
* Non-interest income excludes capital market business, treasury business and others
Large Corporate Business
Medium Business
Small & Micro Business
High Net Worth Individual
Affluent
Middle Income
Mass
Multi-Corporate Business
December 2015
0.4%
22.0%
4.0%0.4%
19.8%
22.8%
15.4%
15.2%4.0%
6.0%
7.2%
9.6%
4.2%
8.6%
4.4% 5.5% High Net
Worth6%
Multi-Corporate Business
12%
Small & Micro
Business 11%
Medium Business
13%
Large Corporate Business
8%
Mass10%
Middle Income
25%
Affluent15%
29
Business Direction in 2016
Corporate Business SME Business
World Business Private Banking Business
Retail Business
Build seamless cross border solutions in AEC+3 through Regional Value China and M&A Service
Support customers investing in KBank international branches and partner banks Use Digital Banking System to serve cross-border payments and money
transfers Continue to expand service channels by establishing KASIKORNBANK China
(LII) and opening branches in CLMVI** CLMVI = Cambodia, Laos, Myanmar, Vietnam, and Indonesia
Strategy To attain Main Bank status for all customer segments with strong brand positioning
To maintain leadership position in digital banking
To affirm our commitment to service excellence in business operations and to enhance our market position
To become “the Bank of AEC+3” to capture AEC growth opportunities plus China, Japan, and South Korea
To become customers’ Bank of Choice in providing financial advisory and investment banking services
Secure #1 position in transaction and digital banking using innovation and service excellence; continue to support customers operating business in the AEC
To attain #1 Main Bank, Advisory, and Digital Banking status for all retail customers
Strengthen the lead position in digital banking and transaction banking by being the first successful mover in mobile and payment
To achieve World Best-in-Class Financial Service Excellence
Maintain #1 position in SME business by providing customers a full solution service through K-Value Chain Solution
Strengthen business network and enhance the competitiveness of SME customers under “K SME Full Support for SMEs” campaign
Cooperate with Lombard Odier to raise private banking service standards to international levels
Increase service range to cover both domestic and overseas investment
Provide integrated wealth planning services, advising families on wealth management, continuity, and growth
30
Performance and Market Position Main Bank Status: maintained #1 ranking in 2014
Trusted Partner Bank: aim to be #1 through comprehensive fund raising solutions, integrated cash management solutions, and value chain solutions
Outright Trading Volume of Corporate Bonds: ranked #1 with 21% market share in Y2015
Corporate Bond Underwriting: ranked #2 with 16% market share in Y2015
Syndicated Loan Arranging: leading position with acclaimed expertise in a wide range of sectors
Transaction Services: top player in transactional banking services
Security Services (MFS): 38% market share in 2014
Cash Management Services: 24% market share in 2014
Trade Finance: 30% market share in 2014
Industrial Expertise: leverage capability in utility, real estate, transportation, communication, and commerce
Knowledge-based Organization: strive to be a knowledge-based organization for family businesses (KFAM Club)
19%21%
23% 23% 24% 24%
0%
10%
20%
30%
2009 2010 2011 2012 2013 2014
23% 24% 25%26% 26%
27%
0%
10%
20%
30%
2009 2010 2011 2012 2013 2014
18%
15% 14%17%
11% 14% 13%
0%
10%
20%
30%
2009 2010 2011 2012 2013 2014 9M15
Corporate Business: Performance and Market PositionMulti-Corporate
BusinessLarge Corporate
BusinessMedium Business
Small and Micro Business
High Net WorthIndividual
MiddleIncome
Mass
Corporate Bond Underwriting
Affluent
Source: The Thai Bond Market Association (ThaiBMA)
Main Bank Status Cash Management Services
Note: Main Bank Status = % of customers in the market who use KBank and its wholly-owned subsidiaries as their main operating bank and/or main savings and investment bank and/or main borrowing bank
(#1) (#1) (#1)(#2) (#2)(#3) (#4)
(#2) (#2) (#2) (#2)(#1) (#2)(#1) (#1) (#2)(#2)
(#2) (#3)
Source: KBank Customer Survey (updated annually) Source: KBank Customer Survey (updated annually)
31
27% 27% 28% 29% 29% 30%
0%
10%
20%
30%
2009 2010 2011 2012 2013 2014
27% 29% 30% 30% 30% 30%
0%
10%
20%
30%
2009 2010 2011 2012 2013 2014
Multi-Corporate Business
Large Corporate Business
Medium Business
Small and Micro Business
High Net WorthIndividual
MiddleIncome
MassAffluent
SME Business: Performance and Market Position
Performance and Market Position Main Bank Status: improved main bank status and strengthened #1 position
Market Share: maintained 30% market share and strengthened #1 position
Market Position: strengthened #1 position in SME market – “Bank for SMEs”; targeted to be SME market leader in all areas
Improved capital usage efficiency by increasing total income to loan ratio
Only bank to offer comprehensive solutions to SMEs through K SME program (launched in 2006, with a total of 20 classes and about12,000 participants so far) and K SME Knowledge Center (established in 2009)
#1 in Market Share by Value #1 in Main Bank Status
Source: KBank Customer Survey (updated annually)
(#1)
Source: KBank Customer Survey (updated annually)
(#1) (#1)(#1) (#1)
(#1)(#1) (#1)
Note: - SME Business in Thailand accounts for 37.4% of Thailand’s GDP, or Bt4.45trn; 0.7 million SMEs registered as legal entities (as of December 2013); supported by the government to become a key factor in economic and social growth (Source: The Office of Small and Medium Enterprises Promotion or OSMEP)
- Market Share by Value = share of revenue (derived from both credit and non-credit products) that each bank gains from the market - Main Bank Status = % of customers in the market who use KBank and its wholly-owned subsidiaries as their main operating bank and/or main savings and investment bank and/or main borrowing bank
(#1)(#1)
(#1)(#1)
32
Multi-Corporate Business
Large Corporate Business
Medium Business
Small and Micro Business
High Net WorthIndividual
MiddleIncome
MassAffluent
Retail Business: Performance and Market Position
22.7%22.9%24.3%
25.5%23.1%
0%
10%
20%
30%
2011 2012 2013 2014 2015
Performance and Market Position Market Penetration**: strong market penetration to affluent customers and maintaining top tier market penetration to middle income customers Bancassurance: MTL ranked #1 in all Bancassurance premiums, with 29.6% market share in new business premium, 27.4% market share in total premium, and 25.7% market
share in renewal premium for 2015; moreover, MTL is focused on balancing First Year Premium and Single Premium to create a sustainable portfolio Fund Management Service:
Mutual Funds: KAsset maintaining #1 position since 2010, with highest market share at 22.7% in 2015; received Top Investment House Asian Currency Bonds Thailand Award for 2 consecutive years from The Asset (Hong Kong)
Mutual Funds + Private Funds + Provident Funds: maintaining #1 position for 7 consecutive years; with highest total AUM over Bt1.1trn (20.5% market share, as of December 2015)
Mortgage Loans: ranked in top 3, with 8.0% market share in September 2015; conservative growth and maintaining a good quality portfolio Credit Cards:
Total spending: ranked #1, with 23.0% market share in November 2015 Number of cards: ranked #2, with 16.9% market share in November 2015 Card-accepting merchant services (Online & Offline Platforms): ranked #1, with 38.2% market share by sales volume in November 2015
Debit Cards: #1 in total debit card spending; maintaining top position by providing functions and features to match customer lifestyles; launched new Character Card, Co-Branded K-
DEBIT 7PURSE,Thailand Football Club Debit Card, and SIAM PIC-GANESHA Debit Card
8.0%8.1%9.4%9.6%
8.9%
0%
5%
10%
2011 2012 2013 2014 9M15
#1 in Mutual Fund (KAsset) Mortgage Loan
(% Market Share) (% Market Share) (% Market Share)
Bancassurance*(New Business, Total and Renewal Premium)
Ranked #1 in all Bancassurance premiums Ranked #1 in Mutual Fund AUM
(KAsset)
( #1) (#2) (#3) (#3) (#3) (#3)
Maintaining good quality portfolio with lower NPL than industry
Note: * Total Premium = New Business Premium (NBP) + Renewal Premium; New Business Premium = First Year Premium (FYP) + Single Premium (SP)** Market penetration = % of customers in the market who use at least one of the products of KBank and its wholly-owned subsidiaries
25.0%23.5%
26.1% 27.6%29.6%
22.1% 22.3%23.7% 25.1%
27.4%
19.5% 21.1%21.6% 22.8%
25.7%
0%
5%
10%
15%
20%
25%
30%
35%
2011 2012 2013 2014 2015
NewBusiness
TotalPremium
RenewalPremium
(#1) (#1)(#1) (#1)
33
21 23 2426
34 33 32
0
10
20
30
40
50
2009 2010 2011 2012 2013 2014 2015
Channels: Corporate and SME Business
Cheque Direct Service
Customer facilitation in areas with good potential via opening financial service centers and cheque points
Reduction in the number of centers was a result of consolidation of some centers* Name changed from Corporate & SME Service Center to International Trade Service Center
** Excluding International Trade Service Centers; there could be more than one SME Business Center per branch
Note:
SME Business Center**
12
68
68 8 8
0
5
10
15
20
2009 2010 2011 2012 2013 2014 2015
60 61 6263 63 62 58
0
20
40
60
80
100
2009 2010 2011 2012 2013 2014 2015
International Trade Service Center *
Corporate Business Center
8795
114 117
145
120 127
0
50
100
150
200
2009 2010 2011 2012 2013 2014 2015
34
2011 2012 2013 2014 2015Branch 3 816 865 965 1,124 1,120 - Bangkok and Metro 46% 45% 42% 39% 38% - Upcountry 54% 55% 58% 61% 62%ATM 7,366 7,603 8,740 9,853 9,349 - Bangkok and Metro 52% 51% 48% 44% 44% - Upcountry 48% 49% 52% 56% 56%CDM 1,067 1,398 2,195 2,775 2,706 - CDM (Deposit) 95% 76% 52% 46% 47% - CDM (Duo-Function) 5% 24% 48% 54% 53%K-Lobby
4 103 126 185 238 238
THE WISDOM Corner, Center, Lounge and Lounge@
31 36 75 100 105
7,366 7,603 8,740
9,853 9,349 9,394
1,067 1,398
2,195
2,775 2,706 2,696
0
5,000
10,000
15,000
2011 2012 2013 2014 2015 2016F400
600
800
1,000
1,200
2011 2012 2013 2014 2015 2016F
Branch
(+11)
Channels: Retail BusinessSelf-Service Channel (ATM + CDM ) 1
(-105 2)
(+568)816865
965 (+1,934)
4 K-Lobby is an electronic banking service with multiple functions such as K-ATM, K-CDM (Cash Deposit Machines), and K-PUM (Passbook Update Machine). K-Lobby is available to serve customers both outside of branch offices and as stand-alone machines in areas without branches
(+100)
Note:
2 A drop in the number of ATMs reflects a relocation plan
1,124(+159)
(+49)
Key Strategies in Channel ExpansionBranch: Maintain competitive number of branches to create perception of convenience Continually focus on improving branch productivity and e-channel migration in 2016Self-Service Channel: Self-service channels will total 12,090 machines in 2016, after removal of outdated and low
transaction machines; this is sufficient to create convenience in transactional services Focus in 2016 on increasing efficiency and service availability through self-service channels Digital Banking: #1 market share of Thailand Digital Banking users (BOT report, September 2015) #1 Top Mobile Banking Application in Thailand (57%) from Priceza.com 2015
(Data collection from Google Play Store, Apple App Store, and App Annie) #1 Digital Banking Top of Mind Brand perception rating (Nielsen, 2014)THE WISDOM Corner, Center, Lounge, and Lounge@: THE WISDOM Channels strengthen top positioning, available in all key flagship department
stores, iconic locations, and Thailand’s Suvarnabhumi international airport
(-52)
8,433 9,001
10,935
(+53)
(+1,137)(+237)
CDM (Deposit)
and CDM (Duo-
Function)
1,120
(+331)
(+797)
1 Self-Service Channel includes ATMs and all types of CDM machines providing 24 hour cash deposit, withdrawal, or money transfer services throughout the country
ATM
12,628(+1,693)
(+1,113)
(+580)
12,055(-573)
(-69)
(-504)
3 Branch: Excludes 11 THE WISDOM channel models and 1 K-Express Credit Centers which BOT’s adjusted definition now defines as branches, as they are physically located separately from regular branches
(-4)1,120 *
12,090 *
* 2016 preliminary targets
35
Branch
Sample of Channels
K-Lobby
An electronic banking service with multiple functions such as K-ATM, K-CDM (Cash Deposit Machines), and K-PUM (Passbook Update Machine). K-Lobby is available to serve customers both outside of branch offices and as stand-alone machines in areas without branches
Thematic Branch
THE WISDOM Corner, Center and Lounge
An exclusive center providing a full range of services and facilities to High Net Worth Individual and Affluent segments
Digital Banking
Digital Banking includes:
• K-Mobile Banking
• K-Cyber Service (K-Cyber Banking, K-Cyber Trade and K-Cyber Invest)
• K-Payment Gateway
• K-PowerP@y (mPOS)
Branch @ Department Stores
The thematic branch is designed to blend with the local architecture and culture of each area
THE WISDOM Lounge @ Suvarnabhumi Airport
Thematic Branch @ Central East Ville
36
K-Transformation Project: Completed
Implemented
K-Transformation Foundation Capabilities
Information Technology
Capital (ITC)
Financial Information
System (FIS)
Know Our Customers
(KOC)
Multi-channel
Sales andServices
(MSS)
K-Transformation Supporting Solution (KSS)
Innovation & Product Management
Understanding Customer Needs
Sales & Service Excellence
Strategic Capabilities
Proactive Risk Management
Support K-Strategy (Customer Centricity); opens possibilities to capture new business opportunities
37
- In 2012, Average Product Holding calculation was adjusted in all eight customer segments to align with customer behavior; 2011 numbers were revised for comparison purposes
- Since January 1, 2011, financial statements have been reclassified per the Bank of Thailand’s requirements; the 2009 and 2010 financial statements were restated and adjusted for comparison purposes
New IT Business Capabilities Highlights
- The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards
2007 2008 2009 2010 2011 2012
1.69 2.152.71
51.54
2.782.63
47.5350.5750.9253.95
39.0435.23 39.5034.7433.55
Average Product Holdings
Non-interest Income Ratio (%)
Cost to Income Ratio (%)
14.35 12.7915.7315.94 16.72ROE
(%)
2.80
37.58
45.00
20.76
Y2007-2008: Old Financial Presentation
37.79
43.44
20.45
2013 2014
2.89
Y2009 onwards: New Financial Presentation
40.04
44.30
19.38
2015
42.37
45.19
14.54
2.89
K-Transformation Project MilestoneY2008 Y2011 Y2012 (1Q12) Y2014 (1Q14) Y2015 (Jul15)
Note:
KOC & FIS completedKOC key business
capabilities: customer analytics; data mining; campaign managementFIS key business
capabilities: new chart of accounts; enhanced financial controls; enhanced budgeting capabilities; enhanced procurement capabilities
New branch infrastructure platform rollout under MSS completedMSS Key business
capabilities: increased effectiveness of campaign execution from MSS and KOC integration through new branch platform
MSS; branch roll-out completed nationwideMSS key business
capabilities: enhanced sales & service capabilities; single view of customer; multi-channel integration; legacy risk mitigation
ITC: deployed new loan core banking systemITC key business
capabilities: enhanced new product development capability; shortened product development time; reduced maintenance cost in long term
ITC: deployed new deposit core banking systemITC key business
capabilities: enhanced product innovation capability; shortened product development time
Continued a determination to become the
leader in Transaction Banking and
Digital Financial Services
K-Transformation completed
38
KBank: Risk and Credit Management
39
KBank Risk Management Structure The Bank’s organization is structured to facilitate all aspects of risk management; each business units’
responsibilities and segregation of duties are clearly identified in accordance with good internal-control practices
Board of Directors
Audit Committee
Risk Management Committee
SubcommitteeCredit Policy and Risk Management Subcommittee
Credit Process Management SubcommitteeAssets and Liabilities Management Subcommittee
Market Risk Management SubcommitteeOperational Risk Subcommittee
Business Continuity Management SubcommitteeCapital Management Subcommittee
Information Technology Strategy Subcommittee
Business UnitsCBS/ SME/ RBS/
CMB/ WBS/ CSP/ TS
Risk Management UnitsERMSYS
Approve risk appetite and all risk management policies and guidelines
Ensure the effectiveness of risk management system and capital adequacy to facilitate current and future business undertakings both in normal and stress situations
Establish risk management policies and risk appetites of KASIKORNBANK FINANCIAL CONGLOMERATE. Set risk limits for the significant aspects of various risks
Formulate organizational strategy and resources to be used for the risk management operation, in line with the risk management policy of KASIKORNBANK FINANCIAL CONGLOMERATE. This strategy must enable the effective analysis, assessment, evaluation, and monitoring of the risk management process
Credit Policy and Risk Management Subcommittee and Corporate Governance Committee oversee project financing requests that could have adverse impacts on environment and society
Risk management units are responsible for providing independent and objective views on specific risk-bearing activities to safeguard the integrity of the entire risk process and control the risks within acceptable levels
Business units are responsible for continuous and active management of all relevant risks which must be within the acceptable levels appropriate with returns
CBS = Corporate Business Division, SME = SME Business Division, RBS = Retail Business Division, CMB = Capital Markets Business Division, WBS = World Business Division, CSP = Corporate and SME Products Division, TS = Central Treasury Department, ERM = Enterprise Risk Management Division, SYS = Systems Division
40
KBank Credit Risk Management Process
Efficient collection and follow-up of customers with late payments
Restructure viable customers to prevent NPLs
Foreclose pledged assets to recover loan loss
Enhance decision making/support tools for more efficient return and risk evaluation
Setup specific prescreening criteria for potential industries
Enhance customer income validation process
Monitoring Collection & RecoveryCollection & RecoveryOrigination
Portfolio Management
Determine portfolio-by-design i.e., portfolio target setting by key credit concentration dimensions (Country, Industry, Large Customer Group) and other sub portfolio dimensions based on value-based analysis
Manage portfolio according to the Bank’s risk appetite and concentration
Perform stress testing to identify portfolio weaknesses and proactively prepare appropriate management actions
The Bank continues to enhance credit risk management processes to promote risk strategies with justified risk-return tradeoff within the rapidly changing economic environment
Monitor customer behavior and detect early warning signs
Leverage National Credit Bureau information for effective credit monitoring
Ensure credit condition compliance (e.g. insurance, capital injection, project progress)
Take prompt action to prevent credit deterioration
41
• Automated collection system• Efficiently utilize available behavior scoring and collection tools i.e. SMS, automated letter
generation, phone
Unsecured Credit and Merchant Product Service Fulfillment Dept.
Policy Lending
• Sufficiency of cash flow• Growth trends and ability to compete• Management experience and depth• Leverage, Liquidity, and Asset Quality• Credit Risk Mitigation• Facilities Structure
Formula Lending
Corporate SME (Medium) Retails (Housing and Unsecured Loans)
Po
st A
pp
rova
l
• Legal document• Limit set up
Credit Service Fulfillment Dept.
Bank-wide Risk Asset Review
• Customer Review by Relationship Manager (RM)• Credit Portfolio Monitoring Unit to facilitate RM in
customer monitoring• Credit Clinic
Asset Quality Management Operation Dept.
Ap
pro
val P
roce
ss
• Legal document• Limit set up
• Application Score• FICO Score• Bureau information/Credit history• Debt service capacity• LTV
KBank Credit Approval Process
Note: FICO = Fair Isaac Corporation
Formula Lending
• Application Score• FICO Score• Bureau information/Credit history• Debt service capacity • LTV (only housing loan/secured consumer)
SME Credit and Housing Loan Approval Dept.Credit Underwriting Dept.
Unsecured Credit and Merchant Product Service Fulfillment Dept.
SME (Small & Micro)
42
Credit Bureau Summary
Two Types of Credit Reports Offered by NCB:
Consumer credit report for individuals
Commercial credit report for businesses
Credit report (monthly reported by members)
Customer information (Name, address, identification number, birth date, occupation, etc.)
Credit information (History of application, approval history, loan payment history, etc.)
Data Record of Credit Report
Individuals: Credit report remains on file for 3 years
Businesses: Credit report remains on file for 3 years
Members: Financial institutions including commercial banks, specialized financial institutions (SFIs), non-bank financial institutions, finance companies, securities companies, insurance companies, etc.
KBank PracticeNational Credit Bureau (NCB)*
Note: * The concept of a credit bureau started in 1961 and central credit registration started in 1964. The Central Information Service was established in 1999 and its name was changed to Central Credit Information Service in 2000 and to the National Credit Bureau in 2005
KBank’s customers applying for loans
Corporate Business
Multi-Corporate Business
Large Corporate Business
Required to
4 Customer Segments in Retail (HN, AF, MI and MA)
Retail Business
Reject application
Sign agreement to allow the Bank to get credit report from NCB
Good credit
Small & Micro
Business
Medium Business
SME Business
Reject application
Required to (Large companies normally have reliable financial statements)
Optional to
Poor credit Good credit Poor credit
KBank’s Policy
Lending
KBank’s Credit
Scoring
43
Litigation Process
Litigation Process
Under
Negotiation
Negotiate, await approval, document preparation & lawyer process
Pre-court (Notice) Issue notice & court filing
In Court Trial / wait for court ruling
ExecutionCollect payment ruled by court or
foreclose
Public Auction Liquidation process
Litigation process in Thailand takes about 2-3 years
Period
Approximately 2 months
Approximately 2 months
Approximately 9-18 months
Approximately 4 months
Approximately 6-9 months
44
KBank: Financial Performance
45
Consolidated 2014 1Q15 2Q15 3Q15 4Q15 2015
Net Profit (Bt bn) 46.15 12.401 11.479 10.117 5.477 39.474Profitability
- NIM 3.80% 3.67% 3.59% 3.57% 3.66% 3.67%
- ROE 19.38% 18.84% 16.94% 14.62% 7.73% 14.54%
- ROA 1.97% 2.04% 1.84% 1.60% 0.86% 1.60%
- YTD Loan growth 6.12% 1.39% 2.59% 3.32% 5.42% 5.42%
- YoY Loan growth 6.12% 6.75% 6.44% 5.10% 5.42% 5.42%
- YoY Net fee income growth 17.82% 14.63% 14.96% 3.07% 10.50% 10.55%
- YoY Non-interest income growth 16.84% 11.82% 22.51% 12.00% 4.20% 12.57%
Cost control
- Cost to income 44.30% 42.52% 42.24% 41.62% 54.55% 45.19%
Asset quality
- NPL ratio 2.24% 2.26% 2.39% 2.62% 2.70% 2.70%
- Coverage ratio 141.38% 139.74% 138.13% 131.63% 129.96% 129.96%
Loans to Deposits 93.70% 93.64% 93.86% 94.08% 94.40% 94.40%
Tier 1 Ratio 13.49% 13.20% 13.77% 14.61% 14.53% 14.53%
CAR 17.31% 17.01% 17.39% 17.73% 18.00% 18.00%
2015 Performance Highlights
- The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes from January 1, 2014 onwards
Note: - Under Bank of Thailand regulations, net profit in the first half of the year is counted as capital after approval by the Board of Directors as per Bank regulations. Net profit in the second half of the year is counted as capital after approval of the GeneralMeeting of Shareholders. However, when a net loss occurs, the capital must be reduced immediately
- Capital Adequacy Ratio (CAR) has been reported in accordance with Basel III Capital Requirement from January 1, 2013 onwards.CAR is based on KASIKORNBANK FINANCIAL CONGLOMERATE. KASIKORNBANK FINANCIAL CONGLOMERATE means the company under the Notification of the Bank of Thailand re: Consolidated Supervision, consisting of KBank, K Companies, and subsidiaries operating in supporting KBank, Phethai Asset Management Co., Ltd., and other subsidiaries within the permitted scope of the BOT’s definition to be a financial conglomerate
2015 net profit dropped 14.47% YoY, due to high provisioning expenses, while EBPT grew 4.69%
Loans grew 5.42% YoY from all businesses
NIM was 3.67% in 2015
Net fee income continued to grow due to customer-centric strategy; capturing digital banking and recurring transactional fees with strong cross-selling capabilities
2015 cost to income ratio was at 45.19%; cost to income ratio in 2016 will range between 45.0 – 47.0%
NPL increased; coverage ratio was 129.96%
Capital base maintained
46
Consolidated Financial Statements
- KBank acquired additional ordinary shares in MTGH, to hold a 51% stake valued at Bt7,529mn; the MTGH Acquisition was completed on November 30, 2009. As the MTGH acquisition was completed on November 30, 2009, the Bank’s consolidated financial statements from 2010 include the performance of companies in the MTGH Group for the whole year.
Statements of Comprehensive Income (Bt mn)
2013 2014 1Q15 2Q15 3Q15 4Q15 2015
Interest income 106,226 113,578 28,531 28,680 28,496 28,647 114,354Interest expenses 33,428 30,446 7,556 7,561 7,402 6,822 29,341Interest income - net 72,797 83,132 20,975 21,119 21,094 21,825 85,013Fee and serv ice income 36,613 42,690 11,273 11,587 11,588 11,966 46,413Fee and serv ice expenses 7,803 8,746 2,240 2,039 2,188 2,421 8,887Fee and service income - net 28,810 33,944 9,033 9,548 9,401 9,545 37,526Total operating income 169,002 199,975 56,111 55,725 53,132 55,586 220,555Underwriting expenses 48,685 61,319 19,852 17,969 15,987 19,232 73,039Total operating income - net 120,317 138,656 36,259 37,756 37,145 36,355 147,515Total other operating expenses 52,270 61,419 15,417 15,947 15,460 19,832 66,656Impairment loss of loans and debt securities 11,743 14,243 4,007 6,037 7,507 8,827 26,377Operating prof it bef ore income tax expenses 56,303 62,994 16,836 15,772 14,178 7,696 54,482Income tax expenses 11,457 12,692 3,321 2,924 2,743 1,540 10,527Net prof it attributable: Equity holders of the Bank 41,325 46,153 12,401 11,479 10,117 5,477 39,474 Non-controlling interest 3,522 4,148 1,114 1,370 1,318 679 4,481
Statements of Financial Position (Bt mn)
2013 2014 1Q15 2Q15 3Q15 4Q15 2015
Loans to customers (less def erred rev enue) 1,438,978 1,527,080 1,548,238 1,566,691 1,577,780 1,609,887 1,609,887Total Assets 2,290,045 2,389,137 2,474,871 2,511,723 2,538,678 2,555,305 2,555,305Deposits 1,529,835 1,629,831 1,653,391 1,669,174 1,677,008 1,705,379 1,705,379Total Liabilities 2,053,038 2,108,451 2,180,645 2,213,568 2,231,867 2,243,092 2,243,092Total Equity attributable to equity holders of the Bank 219,232 257,059 269,437 272,745 280,882 285,800 285,800
Notes:
- In accordance with the corporate income tax rate reduction from 30% of taxable profit to 23% in 2012 and 20% in 2013, KBank recognized a one-time Bt1.9bn impact to the 4Q11 income statement due to deferred tax item adjustments; there was no effect on the business undertakings, profitability, or capital fund of the Bank and its subsidiaries
- The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards
47
24.2335.26
41.33 39.47
0
10
20
30
40
50
2011* 2012 2013 2014 2015
(Bt bn)
Earnings Before Provision and Tax (EBPT) and Net Profit
47.4957.37
68.0577.24 80.86
0
20
40
60
80
100
2011* 2012 2013 2014 2015
(Bt bn)
December 2015 (Consolidated)
EBPT Net Profit
2011* 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15
EBPT (Bt bn) 47.49 57.37 68.05 77.24 80.86 20.84 21.81 21.68 16.52
EBPT Growth (% YoY) 27.86% 20.81% 18.61% 13.50% 4.69% 4.66% 14.64% 4.91% (6.27%)
Net Profit (Bt bn) 24.23 35.26 41.33 46.15 39.47 12.40 11.48 10.12 5.48
Net Profit Growth (% YoY) 20.85% 45.55% 17.20% 11.68% (14.47%) 3.87% (2.16%) (19.17%) (45.05%)
* In accordance with the corporate income tax rate reduction from 30% of taxable profit to 23% in 2012 and 20% in 2013, KBank recognized a one-time Bt1.9bn impact to the 4Q11 income statement due to deferred tax item adjustments; there was no effect on the business undertakings, profitability, or capital fund of the Bank and its subsidiaries
Note:
EBPT grew 4.69% YoY, but net profit dropped 14.47% YoY in 2015 due to high provisioning expense
46.15
48
16.72
20.76 20.45 19.38
14.54
0
4
8
12
16
20
24
2011* 2012 2013 2014 2015
(%)
1.481.86 1.89 1.97
1.60
0.0
0.5
1.0
1.5
2.0
2.5
2011* 2012 2013 2014 2015
(%)
2011* 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15
ROA (%) 1.48 1.86 1.89 1.97 1.60 2.04 1.84 1.60 0.86
ROE (%) 16.72 20.76 20.45 19.38 14.54 18.84 16.94 14.62 7.73
Note:
ROA and ROE
ROA ROE
December 2015 (Consolidated)
* In accordance with the corporate income tax rate reduction from 30% of taxable profit to 23% in 2012 and 20% in 2013, KBank recognized a one-time Bt1.9bn impact to the 4Q11 income statement due to deferred tax items adjustment; there was no effect on the business undertakings, profitability, or capital fund of the Bank and its subsidiaries
49
Net Interest Margin
3.75 3.58 3.55 3.80 3.67
012345
2011 2012 2013 2014 2015
(%)
(%)
NIM
December 2015 (Consolidated)
Note: * Cost of deposits including contributions to the Financial Institutions Development Fund (FIDF) and Deposit Protection Agency (DPA)
Yield on Loans
Yield on Earnings Assets
Cost of Fund
Cost of Deposit*
Yield on Earnings Assets and Cost of Fund
5.55 5.42 5.18 5.19 4.94
5.94 6.24 6.37 6.336.06
2.08 2.141.93 1.69 1.59
1.70 1.99 1.89 1.63 1.47
0
2
4
6
8
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15
NIM (%) 3.75 3.58 3.55 3.80 3.67 3.67 3.59 3.57 3.66
Yield on Earnings Assets (%) 5.55 5.42 5.18 5.19 4.94 4.99 4.88 4.82 4.81Yield on Loans (%) 5.94 6.24 6.37 6.33 6.06 6.18 6.09 6.03 6.01
Cost of Fund (%) 2.08 2.14 1.93 1.69 1.59 1.64 1.61 1.58 1.45
Cost of Deposit (%), incl DPA 1.70 1.99 1.89 1.63 1.47 1.54 1.52 1.47 1.35
NIM was 3.67% in 2015, remaining the highest level among large commercial banks High portion of CASA at 72% helped support low cost of fund
50
56.4963.58
72.80
83.1385.01
0102030405060708090
2011 2012 2013 2014 2015
Interest Income - net
(Bt bn)
83.6996.17
106.23113.58 114.35
27.20 32.59 33.43 30.45 29.34
0
20
40
60
80
100
120
2011 2012 2013 2014 2015Interest Income Interest Expenses
(Bt bn)
Interest Income - net
Interest Income and Interest Expenses Interest Income - net
December 2015 (Consolidated)
Note: KBank acquired additional ordinary shares in MTGH, to hold a 51% stake valued at Bt7,529mn; the MTGH Acquisition was completed on November 30, 2009. As the MTGH acquisition was completed on November 30, 2009, the Bank’s consolidated financial statements from 2010 include the performance of companies in the MTGH Group for the whole year
2015 net interest income grew 2.26% YoY
2011 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15
Interest Income (Bt bn) 83.69 96.17 106.23 113.58 114.35 28.53 28.68 28.50 28.65
Interest Expenses (Bt bn) 27.20 32.59 33.43 30.45 29.34 7.56 7.56 7.40 6.82
Interest Income - net (Bt bn) 56.49 63.58 72.80 83.13 85.01 20.98 21.12 21.09 21.83
Interest Income - net (% Growth YoY) 20.85% 12.55% 14.50% 14.20% 2.26% 7.59% 2.62% (0.94%) 0.28
51
2.08 2.14 2.18 2.37 2.53
0
1
2
3
4
2011 2012 2013 2014 2015
(%)
38 39 39 40 42
0102030405060
2011 2012 2013 2014 2015
(%)
Non-interest Income and StructureNon-interest Income to Average Assets
Non-interest Income Ratio
Non-interest Income Structure
2011 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15Non-interest Income (Bt bn) 34.02 40.72 47.52 55.52 62.50 15.28 16.64 16.05 14.53
Non-interest Income Growth (%YoY) 19.78 19.72 16.69 16.84 12.57 11.82 22.51 12.00 4.20
Non-interest Income Ratio (%) 37.58 39.04 39.50 40.04 42.37 42.15 44.06 43.21 39.97
December 2015 (Consolidated)
Note: - Non-interest Income Ratio = Non-interest Income/Total Operating Income - net - Net Premium Earned - net = Net Premium Earned less Underwriting Expense- The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards
Non-interest income grew mainly from net fee income, and gain on trading and FX transactions
15%2%2%
16%18%
61%
60%
0
10
20
30
40
50
60
70
2011 2012 2013 2014 2015
Other Operating Income
Fee and Service Income - net
Net Premium Earned - net
Dividend Income
Share of Profit from Investments on EquityMethod
Gain on Investment
Gain on Trading and FX transactions
4%
0.04% 2%
12%2%
20%
61%
0.4%
14%
3%
2%
0.05% 2%
61%
21%
60%
2%
2%2% 1%
34.0240.72
47.52
(+20%)
(+17%)
(+20%)
(+17%)55.52
0.2%
11%
3%
(+13%YoY)
20%
14%
2%0.2%
2%
62.50
52
23% 23% 24% 24% 25%
0
10
20
30
2011 2012 2013 2014 2015
(%)
20.6424.47
28.8133.94
37.53
0
10
20
30
40
2011 2012 2013 2014 2015
(Bt bn)
Net Fee IncomeDecember 2015 (Consolidated)
Net Fee Income to Net Total Operating IncomeNet Fee Income
2011 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15Fee Income (Bt bn) 26.07 31.43 36.61 42.69 46.41 11.27 11.59 11.59 11.97Fee Income-net (Bt bn) 20.64 24.47 28.81 33.94 37.53 9.03 9.55 9.40 9.55
Fee Income Growth (%YoY) 14.25 20.55 16.50 16.60 8.72 12.98 11.06 3.13 8.35Net Fee Income Growth (%YoY) 13.22 18.56 17.75 17.82 10.55 14.63 14.96 3.07 10.50
Net Fee Income to Net Operating Income (%) 22.80 23.46 23.95 24.48 25.44 24.91 25.29 25.31 26.25
Note: - On the consolidated basis, Bancassurance fees are not included in net fee income since November 30, 2009, due to the elimination of inter-company transactions (the accounting treatment from the Muang Thai Group
Holding consolidation)- The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards and restated the comparative financial statements and financial ratios. There is no effect on net
profit of the Bank and its subsidiaries
2015 net fee income grew 10.55% YoY, mainly from mutual fund business, card related fees and transaction services
Net fee income growth will continue to be helped by the cross-selling capabilities of our customer-centric strategy Net fee income to net total operating income was 25.44% in 2015
53
Others14%
Bancassurance18%
Trade Finance5%Cash
Management4%
Commercial Credit20%
Transaction Services
24%
Credit Card Business
15%
Credit Card Business
Transaction Services
Commercial Credit
Cash Management
Trade Finance
Bancassurance
Others
Net Fee Income Structure (Bank only)
Net Fee Income by Product
Loan Related and Non-loan Related Fees - net
(mainly from credit card merchant fees)
(such as ATM & debit cards, bill payments, money transfers, etc.)
(such as mutual funds, securities services, capital market business, etc.)
(mainly from commercial credit related fees)
(such as fees from payroll accounts)
(fee income obtained from selling Bancassurance products)
Note: - On the consolidated basis, Bancassurance fees are not included, due to the
elimination of inter-company transactions (the accounting treatment from the Muang Thai Group Holding consolidation)
- On the consolidated basis, Net Premium Earned - net (Net Premium Earned Less Underwriting Expenses) from Muang Thai Life Assurance (MTL) is reported as a part of non-Interest Income; KBank has a 38.25% economic interest in MTL
December 2015
Loan-related
22%Non-loan
related78%
54
37.12
47.52
58.41
73.09
85.38
31.7140.19
48.69
61.32
73.04
0
20
40
60
80
2011 2012 2013 2014 2015
Net Premium Earned Underwriting Expenses
(Bt bn)
5.417.33
9.7311.77 12.34
0
5
10
15
20
2011 2012 2013 2014 2015Net Premium Earned - net
(Bt bn)
Net Premium Earned - net
Net Premium Earned and Underwriting Expenses Net Premium Earned – net
December 2015 (Consolidated)
Note: KBank acquired additional ordinary shares in MTGH, to hold a 51% stake valued at Bt7,529mn; the MTGH Acquisition was completed on November 30, 2009. As the MTGH acquisition was completed on November 30, 2009, the Bank’s consolidated financial statements from 2010 include the performance of companies in the MTGH Group for the whole year.
2011 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15
Net Premium Earned (Bt bn) 37.12 47.52 58.41 73.09 85.38 22.82 21.96 18.96 21.63
Underwriting Expenses (Bt bn) 31.71 40.19 48.69 61.32 73.04 19.85 17.97 15.99 19.23
Net Premium Earned - net (Bt bn) 5.41 7.33 9.73 11.77 12.34 2.97 3.99 2.98 2.40
Net Premium Earned - net (% Growth YoY) 39.84 35.41 32.79 20.96 4.86 (1.63) 31.87 (0.21) (12.32)
Net Premium Earned - net = Net Premium Earned less Underwriting Expense
55
Other Operating Expenses
Other Operating Expenses Structure
December 2015 (Consolidated)
46%46%
43%
22%21%
7%8%0.2%0.2%
25%25%
3%
0
10
20
30
40
50
60
70
2011 2012 2013 2014 2015
Impairment on ApplicationSoftware & Related Expenses
Others
Directors' remuneration
Taxes & Duties
Premises & Equipment
Employee's expenses
44%
20%
8%
24%
27%
7%
20%
0.2%
46%
0.2%
27%
6%
20%
43.0246.93
(Bt bn)
52.27
2011 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15Other Operating Expenses (Bt bn) 43.02 46.93 52.27 61.42 66.66 15.42 15.95 15.46 19.83
% Growth (YoY) 13.20 9.10 11.37 17.50 8.53 16.38 5.35 3.38 9.69
Note: The Bank and its subsidiaries have adopted TFRIC 13: Customer Loyalty Programmes since January 1, 2014 onwards
61.4266.66
0.2%
2015 other operating expenses rose 8.53% YoY, due mainly to an extraordinary expense from setting the allowance for impairment on application software, amounting to Bt2.3bn
3%
56
12.439.57 8.46
6.12 5.42
0
5
10
15
20
2011 2012 2013 2014 2015
(%)
Loan Growth December 2015 (Consolidated)
Loan Growth (% YoY)
2011 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15Loans (Bt bn) 1,211 1,327 1,439 1,527 1,610 1,548 1,567 1,578 1,610
Loan Growth (% YoY) 12.43 9.57 8.46 6.12 5.42 6.75 6.44 5.10 5.42
Loan Growth (% YTD) 12.43 9.57 8.46 6.12 5.42 1.39 2.59 3.32 5.42
Loans grew sensibly at 5.42% YoY, from all businesses
57
Loan Structure and Loan Growth TargetsDecember 2015 (Consolidated, TFRS 8: Operating Segments*)
Loan Portfolio Structure Loan Structure, Loan Yield and Loan Growth Targets
** December 2014 loan base is not comparable with previous reports, due to customer migration to larger segments and changes to comply with TFRS 8
Loan Definition (TFRS 8: Operating Segments)Corporate Loans: Loans of KBank and KBank’s Subsidiaries in Corporate Segments (Annual sales turnover > Bt400mn)SME Loans: Loans of KBank and KBank’s Subsidiaries in SME Segments (Annual sales turnover ≤ Bt400mn)Retail Loans: Loans of KBank and KBank’s Subsidiaries in Retail SegmentsOther Loans: Loans in Enterprise Risk Management Division (NPL + Performing Restructured Loans), and other loan types
Note: * Since 1Q13, as per the Bank of Thailand’s requirement, the Bank has complied with TFRS 8 (Operating Segments) to present operating results for each key segment in financial reports
Y2015 Previous Loan Growth Target (%): Corporate 4-6%, SME 8-10%, Retail 6-9%, Total Loans 8-9% Y2014 Loan Growth Target (%): Corporate 5-7%, SME 6-8%, Retail 6-9%, Total Loans: Less than 8%
(Amount in Bt bn) Dec14** Y2014 Dec-15 Y2015 2015
Loan Loan Yield
Growth Growth Range
(%) (%) (%)1) Corporate 456 2.2 468 2.7 3-5%
Multi-Corporate Business 223 0.6 238 6.8Large Corporate Business 233 3.8 230 (1.0)
2) SME 572 10.3 618 8.0 6-8%Medium Business 299 10.6 329 9.9Small and Micro Business 270 9.7 281 4.2
3) Retail 408 6.7 422 3.5 5-7%4) Others 91 (0.7) 102 11.6Total Loans 1,527 6.1 1,610 5.4 6.1% 6-7%
5-7%
5-7%
2016
Loan Growth Target (%)
4-6%
Bt bn
7% 6% 6% 6%26% 27% 27% 26%36% 36% 37% 38%31% 31% 30% 29%
0400800
1,2001,600
2012 2013 2014 2015
Corporate
SME
Retail
Others
1,3271,5271,439 1,610
58
Loan by Retail Products (All Segments) December 2015 (Consolidated, TFRS 8: Operating Segments*)
Loan Definition (TFRS 8: Operating Segments)Housing Loans: KBank’s housing loans to retail customer segmentsCredit Cards: KBank’s credit card loans to all eight customer segmentsConsumer Loans: KBank’s consumer loans to retail customer segmentsKLeasing: KLeasing’s loans to all eight customer segments
Note: * Since 1Q13, as per the Bank of Thailand’s requirement, the Bank has complied with TFRS 8 (Operating Segments) to present operating results for each key segment in financial reports
Loan by Retail Products
** December 2014 loan base is not comparable with previous reports, due to customer migration to larger segments and changes to comply with TFRS 8
(Amount in Bt bn) Dec 14** Y2014 Dec 15 Y2015 % Portion
Loan Loan to
Growth Growth Total Loan(%) (%)
Housing Loans 225 4.7 234 4.1 14.5Credit Cards 76 15.8 81 7.3 5.1Consumer Loans 50 13.8 53 6.7 3.3KLeasing 90 0.7 89 (1.2) 5.5
59
Immediate Repricing61.5%<6 months
11.2%
6 months and over13.5%
Other13.9%
Loan Portfolio Breakdown by Industry, Currencies, and Interest Rate
Loan Portfolio by Industry (September 2015)**
Definition of Loans1) by industry = Gross loans = Loans to customers less deferred revenue2) by currency = Loans to customers and AIR - net3) by maturity of interest repricing = Loans to customers less deferred revenue
By Currencies (June 2015)***
Note:
Thai Baht92.9%
US Dollar*6.4%
Other Currencies*0.7%
(Bt bn)
September 2015 (Consolidated)
** The data as of December 2015 is not available until the release of the audited financial statements *** The information on loans breakdown by currencies and maturity of interest repricing are disclosed on half year basis
By Maturity of Interest Repricing (June 2015)***
* Mainly trade finance products
Loans by Bangkok and Metropolitan vs. Upcountry
Proportion of KBank's Outstanding Loans 2012 2013 2014 9M15
Bangkok and Metropolitan 65% 65% 64% 63%
Upcountry 35% 35% 36% 37%
54.3% 51.2% 48.9% 48.9% 48.1% 48.3% 48.7% 48.9%
5.7%6.2% 6.5%
6.7% 6.9% 7.1% 7.1% 6.8%
10.7%12.4%
13.0%13.0% 12.5% 12.4% 13.2% 13.3%
15.5%16.0%
16.0%15.5% 14.8%
14.8% 14.9% 15.0%
11.4%
11.6%13.1%
13.6%15.7% 15.5% 14.2% 14.1%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2010 2011 2012 2013 2014 1Q15 2Q15 3Q15
Others
Housing Loans
Utilities & Services
Real Estate & Construction
Manufacturing & Commerce
Agricultural and Mining
2.0%
1,5481,5271,439
1,3271,211
1,077
2.0%2.3%2.4%2.5%2.5%
1,567
1.9%
1,578
60
127.1 131.8 134.5 141.4 130.0
0
50
100
150
2011 2012 2013 2014 2015
2.45 2.16 2.11 2.242.70
0
2
4
6
8
2011 2012 2013 2014 2015
Asset QualityDecember 2015 (Consolidated)
NPL Ratio(%)
Coverage Ratio(%)
2011 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15
NPL Ratio (%) 2.45 2.16 2.11 2.24 2.70 2.26 2.39 2.62 2.70
Coverage Ratio (%) 127.12 131.83 134.52 141.38 129.96 139.74 138.13 131.63 129.96
1.6 1.52.0 1.6
2.2
0
2
4
6
8
2011 2012 2013 2014 2015
SML* to Total Loans(%)
Note: * SML = Special Mention Loans are loans passing the due date by more than 1 month but not over 3 months
NPL ratio was 2.70% in 2015 Coverage ratio was 130.0%; this ratio has been maintained above 100% since 2Q10 2016 asset quality is expected to remain manageable
61
6466
85 96
168
0
50
100
150
200
2011 2012 2013 2014 2015
7.35 8.3911.74
14.24
26.38
048
1216202428
2011 2012 2013 2014 2015
Impairment Loss of Loans and Debt Securities (Provision) and Credit CostDecember 2015 (Consolidated)
Impairment Loss of Loans and Debt Securities Credit Cost
2011 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15Impairment Loss of Loans and Debt Securities (Bt bn) 7.35 8.39 11.74 14.24 26.38 4.01 6.04 7.51 8.83
Credit Cost (bps) 64 66 85 96 168 104 155 191 222
(Bt bn) (bps)
2015 credit cost increased to 168 bps, to be prudent and aligned with macro environment and credit cycle 2016 credit cost will be up to 170 bps
62
Proactive risk management to counter economic slowdown and high household debt
SME Business
Selective on quality of customers
Proactive risk management by visiting customers; raise productivity of sales teams and relationship managers
Efficient collection process
Offer financial aid package for SMEs who need urgent financial aid to temporarily alleviate customer burden, such as grace period or reducing interest and/or principal for 3-6 months; new credit for enhancing liquidity
Shift toward customers less sensitive to high household debt (high income customers)
Proactive and efficient collection process
Analyze behavior regularly to identify weak spots
Slow growth with focus on high-income customers
Offer financial aid package for those needing urgent financial aid. i.e. grace period or re-scheduling payments
Continue to deploy proactive credit portfolio/ risk management/ asset quality management to mitigate adverse impact from earlier political unrest and high household debt
High-impact customers: review policy/ process and offer financial aid programs Low-impact customers: closely monitor
Corporate Business Retail Business
Focus on high potential industries less impacted by economic slowdown
Closely monitor customers in high risk industries and supply chains
Actively monitor early warning signs
Promptly respond to adverse events
63
38%27% 22% 24% 22% 26% 22% 17% 17% 23%
62%73%
78%76% 78% 74% 78% 83% 83%
77%
0
20
40
60
80
100
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
% of Perfo rming Restructu red lo ans to Restructured loans% of Non-Performing Restructured loans to Restructured loans
18.717.3
16.1 16.7 15.915.1
12.5 13.4
16.1
0
5
10
15
20
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(Bt bn)
12.1
Bad Assets Resolution
(Bt bn)
December 2015 (Consolidated)
Outstanding Foreclosed Properties
Note: * On September 11, 2013, the Bank was formally notified of its final loss sharing portion under the asset transfer agreement with TAMC established in October 2001. This amounted to Bt206mn. An amount of Bt1,159mn relating to the provision for losses recordedin prior years has been reversed through profit or loss in 2013.
(Bt bn)
2001-2004: KBank sold NPLs totaling Bt14.6bnto TAMC*
2007: KBank and Phethai AMC sold NPLstotaling Bt11.4bn to Standard Bank Asia Limited and Morgan Stanley Emerging Markets Inc. at Bt7.6bn and Bt3.8bn, respectively
2008-2015: NPLs continued to decline without bulk NPL sales
Write-offs NPL Portfolio Sales Sales of Foreclosed Properties
Restructured Loans
(Bt bn)
52.33
67.0177.19 74.50
% of Restructured loans to Total loans
Outstanding Restructured Loans was Bt113.80 in 2015; 77% were performing restructured loans Definition: Outstanding Restructured Loans is the outstanding amount of restructured loans, comprised of
performing restructured loans and non-performing restructured loans. Non-performing restructured loans are already counted as part of Non-Performing Loans (NPLs)
Restructured loans*
61.51
76.70 82.38
9.1%
6.9% 7.4%8.2%
6.9% 6.3% 6.2% 5.9% 6.1%7.0%
0%
4%
8%
12%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
85.8393.52
2.0
2.8
4.1
7.2
6.0
4.85.05.65.4
5.0
0
2
4
6
8
10
2006 2007 2008 2009 2010 2011 2012 2013 2014 9M15
0.0
5.0
10.0
15.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Write-off 11.6 8.7 4.3 5.5 4.3 3.9 5.0 10.3 7.3 10.1
* Note: the information of restructured loans on this page are linked with the restructure loans on page 60
113.80
64
Two kinds of debt resolution: 1) Financial aid program or rescheduling of loans, and 2) Debt restructuring There are some performing restructured loans in the financial aid program KBank has offered the financial aid program to customers since February 2014; the accumulated amount
(Feb14-Dec15) is Bt170bn, with Bt95bn remaining in the program as of December 2015
Financial Aid Program: Periodic Relief of Debt-service Burden to Customers During the Economic Slowdown
Performing Restructured Loans = 77%
Financial Aid Composition (as of December 2015) Restructured Loans*
Bt113.80bn
Note: Pass = loans in Class 1 (loans passing the due date less than 1 month); SML = Special Mention Loans = loan in Class 2 (loans passing the due date by more than 1 month but not over 3 months)* Total loans as of December 2015 was Bt1,610bn
Outstanding Amount
(Remaining loans in the financial aid
program)
NPL
Resume Original Debt-service Terms
Bt17bn
Bt58bn
Bt95bnBt170bn
Current StatusAs of Dec15
AccumulatedAmount
Feb14-Dec15
Outstanding Amount (Bt95bn or 6% of total loans*)As of December 2015
Retail = 8.9%
SME = 90.9%
Performing Loans with
Financial Aid Program
= 63%
Breakdown by Loan Classification
Breakdown by Business
Breakdown by Restructuring Approach
Restructured loans are 7% of total loans*
Special Mention Loan = 10%
Pass = 90%
Performing Restructured Loans with
Financial Aid Program= 37%
* Note: Information on restructured loanson this page is linked with restructured loans on page 63
Non-Performing Restructured Loans = 23%Corporate = 0.2%
4% ofTotalloans
2% oftotal
loans
Restructured loans in the financial aid
program are a part of
performing restructured
loans
65
2% 2% 2% 4% 2%
64%68%
68%60%
45%
33%
29%
29%35%
52%
0.7%
0.4%
0.3%
0.3%
0.4%
0
100
200
300
400
500
600
700
2011 2012 2013 2014 2015Trading Available-for-salesHeld-to-maturity GeneralInvestment in Receivables Investments Subsidiaries
(Bt bn)
264
382
568
497 478
Investment in Securities Portfolio and Structure
Note: Accounting for investments 1) Trading: Stated at fair value (FV). Unrealized gains or losses arising from changes in FV are recognized in the income statement 2) AFS: Stated at FV. Unrealized gains or losses arising from revaluation are reflected in the equity 3) HTM: Stated at amortized cost, after deduction of any allowance for impairment
December 2015 (Consolidated)
Instrument Type Holding Type
KBank continues to manage its investment portfolio by focusing on ensuring sufficient liquidity at all times and adjusting investment position according to interest rate trend to enhance risk-adjusted return
0.4%
2011 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15
Investment Portfolio (Bt bn) 264 382 497 568 478 560 565 476 478
% Growth (YoY) 5.21 44.66 29.97 14.24 (15.83) 9.32 6.29 (10.1) (15.83)
0.4%
0.01%
0.3%
0.06%
0.04%
0.07%0.3%0.08%
0.14%
69%
66
97.5%
95.4%94.1%
93.7% 94.4%94.7%
94.1%92.9% 93.2%
94.1%
85%
90%
95%
100%
2011 2012 2013 2014 2015
Loans to Deposits Loans to Deposits + B/E
1,2421,391
1,5301,630 1,705
36 19 19 10 50
300
600
900
1,200
1,500
1,800
2011 2012 2013 2014 2015
Deposits B/E
Deposits Growth and Loans to Deposits Ratio
Deposits & B/E Loans to Deposits Ratio
December 2015 (Consolidated)
(Bt bn)
2011 2012 2013 2014 2015 1Q15 2Q15 3Q15 4Q15Deposits (Bt bn) 1,242 1,391 1,530 1,630 1,705 1,653 1,669 1,677 1,705
Deposits (% YoY) 12.9% 12.0% 10.0% 6.5% 4.6% 6.4% 6.5% 3.5% 4.6%
Deposits (% YTD) 12.9% 12.0% 10.0% 6.5% 4.6% 1.4% 2.4% 2.9% 4.6%
Loans to Deposits (%) 97.5% 95.4% 94.1% 93.7% 94.4% 93.6% 93.9% 94.1% 94.4%
Deposits have grown at a consistent pace providing a stable source of funding
67
6% 5% 6% 6% 6% 5%
62% 55%60% 58% 61%
67%
32%40%
34%36% 33%
28%
0
400
800
1,200
1,600
2010 2011 2012 2013 2014 2015
Current Savings Term
1,1001,242
1,3911,530
1,630 1,705(Bt bn)
Deposit Structure
Funding Structure and Interest Rate Movement
Funding Structure
KBank Interest Rate Movement (Retail customers)
Savings 0.50
Fixed 3M-12M 0.90-1.30
Fixed 24M-36M 1.45-1.60
MLR 6.50%
MOR 7.37%
MRR 7.87%
Deposit and Bill of Exchange Rates (Jan 9, 2016)
Lending rates (Jan 11, 2016)
(%)
December 2015 (Consolidated)
90%91% 84% 86% 91% 92%
8%5%
5%4% 5% 4%
2%4%
11% 10%4% 4%
-100100300500700900
1,1001,3001,5001,7001,900
2010 2011 2012 2013 2014 2015
Interbank and Money Market ST and LT Borrowings Deposits
1,2281,368
1,6541,769 1,793 1,856
1,2281,368
1,2281,368
1,2281,368
1,2281,228
59%
51%22% 26% 11% 6%
34%
45% 78%74% 89%
94%
0
40
80
120
2010 2011 2012 2013 2014 2015
ST Debentures B/E & Others LT Borrowing
(Bt bn)
72
9588
7287
4%7%
79
ST and LT Borrowings
(Bt bn)
0
2
4
6
8
2007 2008 2009 2010 2011 2012 2013 2014 2015
MLR Savings Fixed 3M
68
Long-term Senior/Subordinated DebenturesIssued Date
Name TypeEmbedded
OptionAmount
Maturity
Years
Interest Rate
(Per annum)
Interest Payment period
Credit Rating
Thai Currency Long-term Senior/Subordinated Debentures
09/10/2015
Subordinated Instruments of KASIKORNBANK PCL
No.1/2015(Basel III-complaint Tier 2)
UnsecuredCallable
after 5.5 years
Bt6,500mn10.5 Years
(09/04/2026)3.95% Quarterly
AA- (tha) by Fitch Ratings
03/10/2014
Subordinated Instruments of KASIKORNBANK PCL
No. 1/2014 (Basel III-complaint Tier 2)
UnsecuredCallable
after 5.5 years
Bt14,000mn10.5 years
(03/04/2025)5.0% Quarterly
AA- (tha) by Fitch Ratings
15/02/2012Subordinated debentures of
KASIKORNBANK PCLNo.1/2012
UnsecuredCallable
after5 years
Bt22,000mn10 Years
(15/02/2022)4.5% Quarterly
AA- (tha) by Fitch Ratingsand axA by S&P
Foreign Currency Long-term Senior/Subordinated Debentures
26/08/2015Senior Unsecured Debentures
of KASIKORNBANK PCLUnsecured - USD26mn *
5.5 Years(26/02/2021)
LIBOR + 1.00% Quarterly -
25/04/2014Senior Unsecured Debentures
of KASIKORNBANK PCLUnsecured - USD350mn *
5.5 Years(25/10/2019)
3.5% Semi-annually Baa1 by Moody’sBBB+ by S&Pand BBB+ by Fitch Ratings 20/09/2012
Senior Unsecured Debentures of KASIKORNBANK PCL
Unsecured - USD500mn *5.5 Years
(20/03/2018)3.0% Semi-annually
21/08/1996Subordinated debentures of
KASIKORNBANK PCLUnsecured
- USD183.3mn20 Years
(21/08/2016)8.25% Semi-annually
BBB by S&PBaa3 by Moody’s
Note: * The issued note are drawn from the Bank’s USD2.5bn Euro Medium Term Note (EMTN) Programme
69
KBank: The wholly-owned subsidiaries, and
Muang Thai Life Assurance
70
December 2015
* In February 2012, KBank and Macquarie signed an Exclusive Strategic Alliance (ESA) covering a range of investment banking and securities operations; KSecurities and Macquarie Securities (Thailand) are traded under a new ticket, KSMACQ. The exclusive strategic alliance agreement ended in February 2015.
KAsset
EST. 1992
KResearch
EST. 1995KSecurities*EST. Jul 2005
KLeasingEST. Aug 2005
KF&EEST.1990
Company Name
KASIKORN ASSET MANAGEMENT CO., LTD.
KASIKORN RESEARCH CENTER CO., LTD.
KASIKORN SECURITIES PCLKASIKORN LEASING
CO., LTD.KASIKORN FACTORY AND
EQUIPMENT CO., LTD.
Company Profile
A leader in fund management business (i.e. mutual funds, provident funds, and private funds)
Professional in providing knowledge in economics, business, money, and banking
Only research house which is an affiliate of a bank
Professional in providing a complete range of professional and excellent financial solutions and services, including investment banking, securities underwriting, and securities brokerage
Professional in providing three core products: hire purchase, financial lease,
and floor plan
Professional in providing a complete range of machinery and equipment leasing services
Asset Size Bt2.36bn Bt0.08bn Bt14.26bn Bt89.53bn Bt13.58bn
Market Share 20.45% N/A 4.40% (#6)* 7.58% (9M15) N/A
2016 TargetsMaintain Top Tier
position
Top of mind research house for media and for the clients
of KBank and its wholly-owned subsidiaries
Maintain leading position in securities business
Maintain a good asset quality portfolio
3.50% YoY growth on outstanding loans
3-year Aspiration
Maintain Top Tier position
Top of mind Research house
Maintain position as a leading securities firm
Provide complete range of financial solutions and
maintain good asset quality
Maintain leading position in equipment leasing industry
Note:
The wholly-owned subsidiaries of KBank: Business Profile and Aspiration
71
1.191.43
1.84
2.25
3.23
3.66 3.85
0
1
2
3
4
2009 2010 2011 2012 2013 2014 2015
The wholly-owned subsidiaries of KBank: Net Profit
Net profit continues to rise, along with synergy among KBank and its wholly-owned subsidiaries
(Bt bn)
Since January 1, 2011, financial statements have been reclassified per the Bank of Thailand’s requirements; the 2010 financial statements were restated and adjusted for comparison purposes; in 4Q10, KBank early adopted TAS 19 (Employee Benefits) and TAS 12 (Income Taxes) to align with international practices and standards; 2009 financial statements were restated for comparison purposes
Note:
KAsset
EST. 1992
KResearch
EST. 1995KSecurities*EST. Jul 2005
KLeasingEST. Aug 2005
KF&EEST.1990
2015 Key Operating Performance
Assets Under Management (AUM): Bt1.13trn
(+3.62% YoY)
Most quoted research house in the media
- Trading volume: Bt860bn
- Number of customers grew 26% YoY
Outstanding loans:
Bt88.67bn (-1.24% YoY)
Outstanding loans:
Bt13.40bn (+8.23% YoY)
* In February 2012, KBank and Macquarie signed an Exclusive Strategic Alliance (ESA) covering a range of investment banking and securities operations; KSecurities and Macquarie Securities (Thailand) are traded under a new ticket, KSMACQ. The exclusive strategic alliance agreement ended in February 2015.
December 2015The wholly-owned subsidiaries of KBank: 9M15 Key Operating Performance
72
1,7562,228 2,167
2,5762,883
3,0153,633
4,2535,118
5,534
241 319 353509
635742
851946
1,090 1,132
0
500
1,000
1,500
0
2,000
4,000
6,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total Industry AUM KAsset AUM
KAsset Highlights in 2015
(Bt bn) (Bt bn)
Mutual Fund81%
Private Fund7%
Provident Fund12%
KAsset AUM Breakdown by Type
AUM (KAsset vs. Industry)
Market Share by AUM
24.619.3
12.0 8.9 5.9
29.323.4 18.3
11.8 8.3 7.2
30.922.2 19.6
12.8 7.8 9.1
28.421.3 19.6
11.8 8.4 10.3
28.720.5 21.0
11.1 6.6 11.3
29.6
0
20
40
KAsset SCBAM KTAM MFC BBLAM Other
2011 2012 2013 2014 2015
Industry Outlook:
Y2015 industry AUM at Bt5.53trn, growing 8.13% YoY
KAsset AUM at Bt1.13trn, growing 3.62% YoY
KAsset Highlights:
Ranked #1 in Mutual Fund with market share of 22.70%. Total AUM market share was 20.45% in Y2015
Mutual fund accounts for 81% of KAsset AUM
(%)
December 2015
73
KResearch Highlights in 2015
Industry Outlook:
The only bank affiliated research house providing knowledge in economics, business, money, and banking
KResearch Highlights:
Most quoted research house in the media. Top of mind research house for media and for the clients of KBank and its wholly-owned subsidiaries
1,528 1,562 1,623
1,3831,499
1,700
1,8851,974
1,678
1,116
307 330424 408 403
0
500
1,000
1,500
2,000
2011 2012 2013 2014 2015
Newspaper Online Newspaper Other Online News
No. of News Quotes
Number of News Quotes
December 2015
74
7,967 8,544 7,962 8,640
12,377 12,486 13,772
21,55120,345 19,549
4191 117 207
430 411 817
1,296 1,251 860
0
200
400
600
800
1,000
1,200
1,400
0
5,000
10,000
15,000
20,000
25,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total Industry Trading Volume KS Trading Volume
3.3 3 .04 .2 4 .8 4 .4
11 .9
5 .9
2 .84 .1 4 .8 4 .8
1 1.9
6 .0
3 .5 3 .44 .5 4 .6
11 .5
6 .2
3 .7 3 .0
5 .0 4 .5
1 0.6
4 .4 4 .02 .8
5 .04 .1
8 .7
0
5
10
15
KS SCBS KTZ BLS TNS MBKET
2011 2012 2013 2014 2015
KSecurities Highlights in 2015
(Bt bn) (Bt bn)
KSecurities Revenue by Business
Trading Volume (KSecurities vs. Industry)
Market Share by Trading Volume(%)
Investment Banking
9%
Brokerage 91%
Industry Outlook: Y2015 industry trading volume* was
Bt19.55trn, decreasing 4% YoY KS trading volume was Bt860bn**
KSecurities Highlights: KS** ranked #6, with 4.40% market share;
maintaining position as one of the leading securities firms
Majority of revenue came from brokerage Number of customers grew 26% YoY, to 97,202
customers in Y2015
* Industry trading volume excluding proprietary trades** In February 2012, KBank and Macquarie signed an Exclusive Strategic Alliance (ESA) covering a range of investment banking and securities operations; KSecurities and Macquarie
Securities (Thailand) are traded under a new ticket, KSMACQ. The exclusive strategic alliance agreement ended in February 2015; KS trading volume includes one month of MACQ volume.
**Note:
December 2015
**
75
KLeasing Highlights in 2015
703 682 631 615549 800
7941,435
1,331
882 800
2.911.3 22.1
33.943.6 53.9
63.882.9
89.2
89.8 88.7
0
50
100
0
500
1,000
1,500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total Car Sales in Thailand KLeasing Outstanding Loans
(Thousand Units) (Bt bn)
KLeasing Outstanding Loans Breakdown**
KLeasing vs. Industry*
KLeasing Highlights:
2015 KLeasing loans totaled Bt88.67bn, declining 1.24% YoY
2015 KLeasing NPL ratio was 1.50%, lower than the Thai commercial bank average ratio
Note: * Excluding captive and non-bank leasing ** Definition of loan type: Hire Purchase = car loans to retail customers; Fleet = a bulk of car loans to corporate and SME customers; Floor Plan = a bulk of car loans to car dealers
Market Share by Total Outstanding Loans (%)*(%)
Industry Outlook:
2015 industry car sales totaled 799,592 units, declining 9.33% YoY
Hire Purchase
64%
Fleet / Financial
Lease28%
Floor Plan8%
3417 16 14 11 8
35
18 14 15 11 7
3518 14 15 11 7
3420 14 14 10 8
3222
13 15 10 8
0
25
50
TBANK AYCAL TISCO SCB KK KLeasing
2011 2012 2013 2014 9M2015 New Car89.7%
Used Car
0.03%
K-Car to Cash10.3%
December 2015
76
KF&E Outstanding Loans
(Bt bn)
Industry Outlook:
Growth in Equipment Finance (EQF) business forecasted using numerous factors including total import volume and total registration volume of equipment and machinery from the Department of Industrial Works and Capital Investment Index
KF&E Highlights:
KF&E outstanding loans were Bt13.40bn, rising 8.23% YoY
KF&E currently ranked #2; maintaining lead position in equipment leasing industry
KF&E Highlights in 2015
3.91
8.019.34
10.86
12.3813.40
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2010 2011 2012 2013 2014 2015
December 2015
Note: In 2010, KASIKORN FACTORING (KFactoring) was renamed KASIKORN FACTORY AND EQUIPMENT (KF&E) to better reflect their business, focusing on offering leasing services for machinery and equipment; the factoring business operation of KFactoring was transferred to KBank
77
25.0
13.6 12.4
8.5 10.3
8.8 5.7
2.3 2.9 3.1
7.3
22.8 14.9 12.5 9.7 9.6 10.3 5.4 3.1 2.8 2.9 6.0
22.2
16.3
12.7 10.3 10.9
8.3 5.4
3.2 3.2 2.6 4.7
-
5.0
10.0
15.0
20.0
25.0
30.0
AIA MTL TLI KTAL SCBLife BLA AZAY PLT FWD OLIC Others
2013
2014
2015
151.1 166.8 173.3 202.5 222.0259.2
296.3 328.6391.4
442.5503.9 537.5
20.0
40.0
60.0
80.0
100.0
120.0
140.0
-
100.0
200.0
300.0
400.0
500.0
600.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total Premium First Year Premium
Market Share by Total Premium in Life Insurance (%)
Premium per % GDP by Country
(%)
Life Insurance Industry in Thailand
(%)
Size of Market by Premium(%)
Total Premium
(Bt bn)
First Year Premium
(Bt bn)
Source: The Thai Life Assurance Association
Source: The Thai Life Assurance Association
Source: Swiss Reinsurance
Note: Total Premium = New Business Premium + Renewal Premium; New Business Premium = First Year Premium + Single Premium
In 2014, low penetration rate of 3.6% in Thailand with a high opportunity for growth
Muang Thai Life Assurance (MTL) ranked #2 in life insurance industry in Thailand, in 2015
#2 in total premium with 16.3% market share and 17% growth
#1 in new business premium with 22.1% market share and 8% growth
14.5 7.5 4.4 3.0 3.1 3.2 1.6 3.8 1.6 1.5 0.6
15.6
7.2 5.0
3.8 2.6 3.1
1.7 3.6
1.1 1.6 0.7
-
5.0
10.0
15.0
20.0
Tai
wan
So
uth
Ko
rea
Sin
gap
ore
Au
stra
lia
Ind
ia
Ma
lays
ia
Ch
ina
Th
aila
nd
Ind
on
esia
Ph
ilip
pin
es
Vie
tnam
Y2012
Y2013
Y2014
* First Year Premium in 2015 = Bt119.7bn
78
Bancassurance Highlights in 2015
The Bancassurance Life industry: total premium improved 8% YoY, and new business premium declined 3% YoY
MTL ranked #1 in Bancassurance market
#1 in Bancassurance total premium with 27.4% market share and 18% growth
#1 in Bancassurance new business premium with 29.6% market share and 4% growth
(%)
Bancassurance Market Share by Total Premium (%)
Bancassurance Market Share by New Business Premium (%)
25.1 19.9 13.8 17.4 6.1 4.3 3.9 3.4 1.8 1.2 3.1
27.4
20.5
14.0 12.8
6.4 5.0 4.8 3.7 1.7 1.5 2.2
0
10
20
30
MTL SCBLife KTAL BLA PLT TLI FWD AZAY AIA DLA Others
2013 2014 2015
Source: Muang Thai Life Assurance (MTL)
Note: Bancassurance premium include all bank partners‘ premiums of MTL
27.6 16.9 13.0 16.6 8.0 3.9 3.4 2.4 2.1 2.7 3.4
29.6
17.1
11.6 11.17.8
5.4 5.0 3.5 2.9 2.6 3.4
0
10
20
30
40
MTL SCBLife KTAL BLA PLT TLI FWD DLA AZAY AIA Others
2013 2014 2015
(%)
79
Current KBank Economic Interests
Muangthai Group Holding Co. Ltd(MTGH)
51.0%
Muang Thai Life Assurance PCL(MTL)
38.3%
Muang Thai Insurance PCL(MTI)
10.1%
Muangthai Broker Co, Ltd(MTB)
50.5%
MT Insure Broker Co, Ltd(MTIB)
99.997%
KBank’s Strategic Acquisition in Muangthai Group Holding (MTGH)
Note: OIC = Office of Insurance Commission
MTGH
MTLMTI MTB
Established April 6, 1951 First life insurance company to be granted Royal
Patronage (since 1959) Joined hands with Ageas in 2004 (formerly known as
Fortis Insurance International NV) and joined hands with KBank in 2005
Credit Rating: BBB+/Stable and axA+ (ASEAN) from S&P’s, A-/Stable and AAA(tha)/Stable from Fitch Ratings
Life Insurance Company with Outstanding Management Award from OIC eight years in a row
Life Insurance Company of the Year 2014 Award from Asia Insurance Industry Awards 2014
Ageas holds 7.8% in MTGH and holds 25% in MTL
MTIB
80
2013 2014 9M15
ROE (%) 26.1% 24.6% 24.8%
ROA (%) 3.4% 3.2% 3.1%
Risk-Based Capital (RBC) 431.6% 546.8% 422.8%
Muang Thai Life Assurance (MTL) Information Summary Strong fundamentals and revenue generation, helped by process efficiency and service quality
enhancements; platform and synergy alignment between MTL and KBank
Risk-Based Capital (RBC) remains strong, sufficient to support business growth and much higher than OIC minimum requirement
Source: Muang Thai Life Assurance, data based on book value except for RBC Note: OIC = Office of Insurance Commission
Statements of Comprehensive Income (Bt bn) 2013 2014 9M15
Net premiums earned 58.4 73.1 63.8Net investment income 8.3 10.1 9.0Total revenues 66.7 83.2 72.7Life policy reserve increase from the previous period 34.2 40.8 36.1Benefits payments to life policyholders 8.7 13.9 12.4Insurance claims and loss adjustment expenses 2.0 2.2 1.8Commissions and brokerages 10.6 12.9 10.8Other underwriting expenses 0.6 0.6 0.5Operating expenses & Other 3.4 4.3 3.4Total Expenses 59.4 74.7 65.0Profit before income tax expense 7.3 8.5 7.6
Income tax expense 1.4 1.6 1.4Net profit (loss) 5.9 6.8 6.2
Statements of Financial Position (Bt bn) 2013 2014 9M15
Total Assets 190.7 240.2 291.6Total Liabilities 166.6 208.8 256.8Total Equities 24.1 31.5 34.8
Strategy in 2015
Enhance the process and quality of services especially regarding technology as the aspiration is to become digital insurer and at the same time, develop products and services to effectively satisfy the needs of all customer groups
2015 Key Financial Targets
Bt bn 2011 2012 2013 2014 2015
Total Premium after refund 37.9 48.9 60.2 75.2 87.9
% Growth 28% 29% 23% 25% 17%
81
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2015
Group Personal Accident Industrial Ordinary
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2015
Other Direct Marketing Bancassurance Agents
16.4 21.7 27.6
35.3 37.9
21.5 27.2 32.6 40.0 49.9
37.9 48.9
60.2
75.2
87.9
0
20
40
60
80
100
2011 2012 2013 2014 2015
First Year and Single Premium Renewal Premium Total Premium
MTL Investment Portfolio and Insurance Premium
Total Premium by Products: Ordinary product accounted for around 90%
MTL Total Premium:Growth continues to outpace the industry
MTL Investment Portfolio: Fixed Income accounted for around 80%
Source: The Thai Life Assurance Association
Total Premium Growth
MTL Industry
(%YOY)Y2010Y2011Y2012Y2013Y2014Y2015
38%28%29%23%25%17%
14%11%19%13%14%7%
(bn)
Assets Under Management (AUM)* (2015): Bt282.8bn
Total Premium by Channels: Bancassurance accounted for about 70% in 2015
*Remark: Invested Assets + Investment Property
82
MTL’s Life Insurance Product ProfileFour Major Types of Life Insurance Product
Ordinary Life Insurance Products: Provide life protection for a fixed amount to an insured person
Can be further classified into four sub-categories;
Endowment Life Insurance: Savings type product; insured person receives an amount at the certain period of
time or a designated beneficiary receives death benefits upon the death of the insured person within the insured
period (e.g. Pro Saving products)
Term Life Insurance: Provides temporary protection with no savings component. Claim can be made upon death
within the stated term period (e.g. MRTA products)
Whole Life Insurance: Provides life time protection (to the age of 90 or 99) with the death benefit paid to the
beneficiary upon the death of the insured (e.g. Pro Life products)
Rider: Additional coverage desired by the insured (sample of additional coverage: medical expense, accident)
Group Life Insurance Products: Term insurance covering a group of people, usually employees of a company or
members of a union or association
Industrial Insurance Products: Life insurance with a modest amount of coverage, low premium, and no health check
requirement
Personal Accident : A limited life insurance designed to cover the insured in case of personal accident
83
Life Coverage at 100% of the sum insured amount
End of Policy Year
Premium Payment at the Beginning of
Policy year
Maturity Benefit100%
Maturity Benefit100%
End of Policy Year
Premium Payment at the Beginning of
Policy year
Life Coverage at 100% of the sum insured amount
Sample of K-Bancassurance and MTL Products
Pro-Savings 615Life insurance with a premium payment of only 6 years, but the coverage continues for 15 years
MRTA-Home (Mortgage Reducing Term Assurance)
Ormsap 20/14Pay premium for only 14 years, but the coverage continues for 20 years
Healthy Value1 year coverage period, covered medical expenses up to Bt2mn
Endowment Life Insurance
K-Bancassurance Products1 Muang Thai Life Assurance Products2
Endowment Life Insurance
Term Life Insurance Term Life Insurance
1) K-Bancassurance products are MTL’s life insurance products selling through KBank2) Muang Thai Life Assurance products are MTL’s life insurance products selling through MTL sales agents, and/or other channels
84
Sample of K-Bancassurance and MTL Products
Pro Life 80/4Life insurance that provides coverage up to the age of 80 with term of premium payment only 4 years while receiving cash bonus every 2 year from the end of policy year 2 and onwards as well as life coverage at 100% of the sum insured throughout the contract
Kumkrong TalodcheepSaving plan with whole life coverage: pay premium for only 20 years and get coverage to the age of 99
Pure CancerAdditional cancer insurance which provides cash benefits up to Bt1mn
PA PlusAccident coverage
Health Care PlusHospital and surgery benefit rider
Whole Life Insurance Whole Life Insurance
Rider Rider
1) K-Bancassurance products are MTL’s life insurance products selling through KBank2) Muang Thai Life Assurance products are MTL’s life insurance products selling through MTL sales agents, and/or other channels
K-Bancassurance Products1 Muang Thai Life Assurance Products2
85
KBank: Other Information
86
September 11, 2015 (Closing Registration Date)Shareholder Structure
Top 10 Shareholders* % Shareholder Structure
1. THAI NVDR CO., LTD**
2. CHASE NOMINEES LIMITED
3. STATE STREET BANK EUROPE LIMITED
4. STATE STREET BANK AND TRUST COMPANY
5. THE BANK OF NEW YORK MELLON
6. NORTRUST NOMINEES LIMITED-NT0 SEC LENDING THAILAND CL AC
7. GIC PRIVATE LIMITED***
8. SOCIAL SECURITY OFFICE
9. MACQUARIE EMERGING MARKETS ASIAN TRADING PTE. LIMITED
10. NORBAX, INC.
Other Shareholders
Total
23.967
11.814
9.940
4.760
1.732
1.654
1.651
1.629
0.966
0.941
40.946
100.000
Foreign Shareholders
49%
Thai Shareholders
51%
(NVDR= 23.97%**)
Thai Shareholding Limit 51%
Foreign Shareholding Limit 49%
Note:
Source: Thailand Securities Depository Company Limited (TSD), the Stock Exchange of Thailand website (www.set.or.th), and KBank
Note: * The Top 10 Shareholders are based on individual accounts** Thai NVDR Co., Ltd (Thai NVDR) is responsible for issuing and selling Non-Voting Depository Receipts (NVDRs) to investors. The Stock Exchange of Thailand (SET) is the major shareholder, holding 99.99%
of the total shares, of Thai NVDR. The NVDR limit for KBank is 35%.*** GIC holds KBank shares via two accounts. Combining those two accounts, GIC holds 2.011% of KBank shares, ranking them at number 5
**** Thailand Securities Depository Company Limited (TSD), a subsidiary of the Stock Exchange of Thailand, provides three types of securities post trade services: securities depository services, securities registration services, and provident fund registration services; the shareholders booked under TSD are those who are not eligible for dividend payments as their investment is not aligned with their citizenship (i.e. foreign investors buying KBank shares on the local board or Thai investors buying KBank shares on the foreign board)
87
Credit Ratings As of February 29, 2016
Outlook Government Outlook
Long-term * Senior Unsecured
Notes
Subordinated Debts
Long-term Subordinated Debts
Moody's Baa1 Baa1** Baa3 Baa1** N/A Stable Baa1 Stable
S&P's BBB+ BBB+ BBB N/A N/A Stable BBB+ Stable
Fitch BBB+ BBB+ N/A AA (tha) AA- (tha) Stable BBB+ Stable
KBank Thailand
Local Currency/ National RatingsForeign Currency
Note: * Moody's: Foreign Currency Long-term Deposit Rating; S&P's: Long-term Counterparty Credit Rating; Fitch Ratings: Foreign Currency Long-term Issuer Default Rating
** Due to a change in Moody’s global bank rating methodology, without any change in its view towards KBank fundamentals, the foreign currency senior unsecured debt and long-term local currency deposit ratings were downgraded from A3 to Baa1 on June 5, 2015
88
Organization Chart
Risk Management Committee
ShareholdersAuditor
Corporate Secretary Board of Directors
Management Committee
Corporate Governance Committee
Human Resources and Remuneration Committee
Audit Committee
Advisory Council to the Board of Directors/
Legal Adviser
Investment Banking Business Division Systems Division
Finance and Control Division
Enterprise Risk Management Division
Customer Service Fulfillment Division
World BusinessDivision
Corporate Secretariat Division
Corporate Strategy Management Division
Corporate Business Division
Corporate and SME Products Division
SME Business Division
Compliance and Audit Division
Retail Business Division
Private Banking Business Division
Capital Markets Business Division
Independent Directors Committee
Human ResourceDivision
89
Board of Directors Structure
• Prof. Khunying Suchada Kiranandana(Vice Chairperson, Lead Independent Director and Chairperson of the Human Resources and Remuneration Committee)
• Prof. Dr. Yongyuth Yuthavong(Chairman of the Corporate Governance Committee)
• Prof. Dr. Pairash Thajchayapong
• Sqn. Ldr. Nalinee Paiboon, M.D.
• Mr. Saravoot Yoovidhya
• Dr. Piyasvasti Amranand(Chairman of the Audit Committee)
• Mr. Kalin Sarasin
• Ms. Puntip Surathin
• Mr. Wiboon Khusakul
• Ms. Suphajee Suthumpun
Executive Directors (4)
• Ms. Sujitpan Lamsam(Vice Chairperson and Chairperson of the Risk Management Committee)
• Dr. Abhijai Chandrasen(Legal Adviser)
• Mr. Sara Lamsam
17 board members: 10 Independent Directors, 4 Executive Directors, and 3 Non-Executive Directors Director age limit is not to exceed 72 years old Term limit of directorship for Independent directors is not more than three consecutive terms of directorship,
effective after the Annual General Meeting of Shareholders (AGM) in 2013 Lead Independent Director and Independent Directors Committee were appointed in order to ensure proper
checks and balancesIndependent Directors (10)Non-Executive Directors (3)
• Mr. Banthoon Lamsam(Chairman of the Board and Chief Executive Officer)
• Mr. Predee Daochai(President)
• Mr. Teeranun Srihong(President)
• Mr. Kattiya Indaravijaya (President)
Note: More information on the Board of Directors biographies can be found on our website http://www.kasikornbank.com/EN/AboutUs/BoardOfDirectors/Pages/CEO.aspx
As of January 28, 2016
90
Economic
EnvironmentalSocial
Shareholders
Board of Directors
Employees
Customers
Counterparties
Competitors
Creditors
Community Environment and Society
Sustainable Development
Note: More information on our Sustainable Development can be found on our website and KBank’s Sustainability Development Report 2014
• Environmentally Friendly Business Operation
• Environmental Management Policies i.e. Water, Energy, and Climate Change (3R)
• Cultural of Environmental Awareness and Protection
EnvironmentalSocial
• Labor Relations Management and Employee Caring
• Employee Development• Occupational Health and Safety• Youth Development• Community and Social Development
Economic
• Corporate Governance• Customer Centricity
• Professionalism• Financial Knowledge
• Innovation• Risk Management
Bank of Sustainability
KASIKORNBANK embraces sustainable development in the economy, society and environment as the foundation of ouroperations. This guiding concept enhances our business innovation and ensures the maximum benefit to all stakeholders,thus paving the way towards being a “Bank of Sustainability” for our society and nation.
91
Public Recognition Highlight: 2014 – 20152015
- Best Retail Bank in Thailand - Best Cash Management Bank in Thailand - Best Retail Bank of The Year 2015
- Thailand Domestic Retail Bank of the Year - Thailand Online Banking Initiative of the Year - Thailand Domestic Cash Management Bank of the Year - Best Branch Innovation of the Year
- Best CEO Award- Outstanding Company Performance Awards- Outstanding Investor Relations Awards- Thailand Sustainability Investment- Banker for Equity Fund
- IR Magazine Global Top 50- Best Investor Relations by a Thai Company 2015
-Best Cash Management Bank-Best Bank in Thailand
- Platinum Awards in Financial Performance, Corporate Governance, Social Responsibility, Environment Responsibility and Investor Relations
- Project Finance Bank of the Year, Thailand- Project Finance Deal of the Year / Best Power Deal, Thailand- Best Energy / Renewable Energy Deal, Thailand- Best Service Providers Cash Management, Thailand- Best Service Providers Trade Finance, Thailand
- Best Cash Management in Thailand
2014-Thailand Top Company Award 2014: Finance & Banking Sector
- Best Retail Bank in Thailand - Best Social Media Project - The Best Cash Management Bank in Thailand
- Best Thai SME Bank in Treasury & Working Capital
- Best Retail Bank of The Year 2014
- Domestic Retail Bank of the Year - Thailand- Online Banking initiative of the Year - Thailand- Best branch Innovation – Silver- Thailand Domestic Cash Management Bank of the Year
- Asia’s Best CEO - Asia’s Best Corporate Governance
- Best Retail Bank of the Year
- Best Merchant Acquiring Initiative of the Year- Best Debit Card of the Year (Thailand)- Best Card Design of the Year APAC (Highly Commended)
- Consumer Protection Thailand Call Center Awards 2014
- Global Finacial Services Awards 2014 - Digital Market
-Top Companies for Leaders
- SET Award of Honor for Excellence in Corporate Governance Report 2008-2014
-- Best Investor Relations Awards-- Outstanding Investor Relations Awards- Outstanding Corporate Social Responsibility Awards
- Best Investor Relations by a CEO- Best Investor Relations by a Thai Company 2014
- Trade Finance Award for Excellence
- Best Cash Management Bank
IAA Awards for Listed Companies 2014- Best CFO: Finance & Banking Sector- Best IR: Finance & Banking Sector
- Asia’s Best CEO (Investor Relations) - Best Investor Relations Professional (Thailand) - Best Investor Relations Company (Thailand)
- Best Bank in Thailand- Best Debt Capital Market House in Thailand
- Best Payment Service Provider
-Thailand ICT Excellence Awards 2015: Innovations Project
- Best Card Design Asia-Pacific- Highly Commended:
Best Credit Card Offering-Thailand
- KBank’s corporate governance rated “excellent” by the Thai Institute of Directors Association
- Best Local Trade Finance Bank in Thailand
ThaiBMA Best Bond Awards- Best Bond House- Best Bond Dealer- Deal of the Year
- Excellent ESCO Financial Supporting Awards
- ASEAN Corporate Governance Awards: Top 50 Publicly Listed Companies for ASEAN
92
Banking System and Regulations Update
93
0
4,000
8,000
12,000
16,000
20,000
2010 2011 2012 2013 2014 Nov-15
Commercial Banks SFIs
(Bt bn)
25.9%28.5%
74.1%71.5%
74.4%
25.6%
74.3%
25.7%
74.0%
25.3%26.0%
73.9%
0
4,000
8,000
12,000
16,000
20,000
2010 2011 2012 2013 2014 Nov-15
Commercial Banks SFIs
(Bt bn)
26.9%28.1%
73.1% 71.9%
29.0%
71.0%
28.3%29.4%
71.7% 70.6%
29.7%
70.3%
Thai Commercial Banks and Specialized Financial Institutions (SFIs)Market Share (% of Total Loans) Market Share (% of Total Deposits)
6 SFIs
Note: 6 SFIs include Government Saving Bank (GSB), Government Housing Bank (GHB), Export-Import Bank of Thailand (EXIM Bank), Bank for Agriculture and Agricultural Co-operatives (BAAC), Small and Medium Enterprise Development Bank of Thailand (SME Bank), and Islamic Bank of Thailand (IBank)
14 Commercial Banks
9,93510,996
13,43910,074
11,79313,573
14,91814,705
15,86615,651
21.1% 19.0% 18.3% 18.3 18.2%17.8% 17.9% 18.4% 19.8% 19.5%17.2%
15.0% 15.0% 15.0% 15.2%16.3%17.3%
17.8% 17.4% 16.8%7.8%
7.4%7.5%
7.7% 9.3%
19.9%
23.3% 23.0%
21.8% 21.0%
0
2,000
4,000
6,000
8,000
10,000
12,000
2011 2012 2013 2014 Nov-15
BBL KTB KBank SCB BAY Others
7,2399,315
10,224 10,888 11,139
17.9% 17.2% 17.0% 16.6% 16.4%18.4% 17.2% 17.4% 18.5% 18.1%15.4% 14.8% 14.5% 14.8% 14.7%16.3% 17.3% 17.6% 17.3% 16.9%8.3%
8.3% 8.4% 8.8% 11.1%23.8%
25.1%25.0% 24.0% 22.9%
0
1,500
3,000
4,500
6,000
7,500
9,000
10,500
12,000
2011 2012 2013 2014 Nov-15
BBL KTB KBank SCB BAY Others
7,5348,591 9,493
9,892 10,374
16,20215,841
November 2015
Net Loans (Bt bn) Deposits (Bt bn)
94
Regulations Update
Financial Sector Master Plan II (FSMP II)
Capital (Basel III)
Year 2015 onwards: FSMP III remains under BOT’s revision, with focus on promoting competition in financial systems and encouraging Thai banks to do business overseas, in line with AEC inception. Attention will also be paid to reducing system-wide operating costs, including establishment of central cash logistics facilities, and enhancement of fund transfer flexibility and efficiency nationwide
Year 2010-2014: The BOT’s FSMP II consists of three key policies: 1) Reducing system-wide operating costs 2) Promoting competition and access to financial services 3) Strengthening financial infrastructure, including market liberalization, increased access by foreign financial institutions via granting licenses in some business areas, and permission for an increased number of branches and ATMs
June 2013: The BOT announced the new “Guidelines and Conditions for Establishing a Branch and Undertaking the Business of a Branch of Foreign Commercial Bank’s Subsidiary”, allowing for new subsidiaries’ licenses of foreign commercial banks to open up to 20 branches and 20 off-premise ATMs
Year 2014-2015: The BOT established a licensing framework for new types of business operation for underserved specific markets, i.e. Nano-finance
Expected impacts on Thai banks: Move toward further liberalization, along with enhanced competition from non-bank companies
Expected impacts on KBank: Ability to maintain competitiveness over both existing and new players, helped by an effective customer-centric strategy and preparation for a changing environment
Source: The Bank of Thailand, KResearch
Thai and International Financial Reporting Standards (TFRSs / IFRSs)
Year 2015 onwards: The time frame is specified by the Federation of Accounting Professions (FAP); new and revised TFRS have been implemented since January 2015 including TFRS 13 : Fair Value Measurement; full IFRS conversion is expected in 2019 (1 year after the IFRS9 effective in EU)
Expected impacts on Thai banks: More logical and transparent presentation and disclosure, with different impacts on each bank
Expected impacts on KBank: Manageable impacts expected, as the Bank early adopted some IASs and IFRSs and continues to prepare for full implementation
January 2013 onwards: Basel III has been implemented in Thailand. BOT requirements are in line with international standards
Expected impacts on Thai banks and KBank: Manageable impacts expected
January 2016 onwards: Liquidity Coverage Ratio (LCR) will be implemented on phase-in basis, from 60% to 100% in 5 years
Expected impacts on Thai banks and KBank: Manageable impacts expected
95
Basel III: The BOT Implementation Timeframe The BOT implementation timeframe is mostly in line with the BCBS timeframe
Effective implementation: Since January 1, 2013 onwards Full Implementation: January 1, 2020
Transitional Arrangement for Capital Requirement
All dates are as of 1 January 2013 2014 2015 2016 2017 2018 2019 2020
Conservation Buffer* - - - 0.625% 1.25% 1.875% 2.5%
CET1: Min. Common Equity Tier 1 Ratio (after conservation buffer)
4.5% 4.5% 4.5% 5.125%(4.5%+0.625%)
5.75%(4.5%+1.25%)
6.375%(4.5%+1.875%)
7.0%(4.5%+2.5%)
Tier 1: Min. Tier 1 Ratio (after conservation buffer) 6.0% 6.0% 6.0% 6.625%(6.0%+0.625%)
7.25%(6.0%+1.25%)
7.875%(6.0%+1.875%)
8.5%(6.0%+2.5%)
CAR: Min. Total Capital Ratio (after conservation buffer) 8.5% 8.5% 8.5% 9.125%(8.5%+0.625%)
9.75%(8.5%+1.25%)
10.375%(8.5%+1.875%)
11.0%(8.5%+2.5%)
Countercyclical Buffer (Subject to the BOT consideration)** - - - 0.0-2.5% 0.0-2.5% 0.0-2.5% 0.0-2.5%
Source: Bank of Thailand (BOT), KBank
* Conservation Buffer is to ensure adequate capital to absorb losses during periods of financial and economic stress. Banks with a CET1 ratio less than the required conservation buffer (i.e. 2.5% CET1) will face various degrees of constraint on distribution of dividends and bonuses
** In periods of excess aggregate credit growth, the BOT may require banks to set a Countercyclical Buffer up to 2.5% to achieve the broader macroprudential goal of protecting the banking sector
*** Requirements and implementation timeline for liquidity ratios have not been finalized. Banks are required to submit data to the BOT for further calibration
Net Stable Funding Ratio (NSFR)***(Available Stable Funding / Required Stable Funding) 100% Effective
Leverage Ratio(Tier 1 / Exposure) 3%
Parallel run period Effective
Liquidity Coverage Ratio (LCR)***(Liquid Assets / Net Cash Outflows within 30 days) 100% LCR 60% LCR 70% LCR 80% LCR 90% LCR 100%
Effective (Phase-in)
96
Tier 1• Issued and paid-up share capital• Premium on ordinary shares• Legal reserve and Retained earnings
• Hybrid Tier 1 (<15% of total Tier 1)• Minority interest, Preferred stock
Common Equity Tier 1• Issued and paid-up share capital• Premium on ordinary shares• Legal reserve and Retained earnings• Other comprehensive income (OCI)
e.g. surplus on AFS bond and equity (100%), surplus on land & premises (100%)
Additional Tier 1• Hybrid Tier 1 with loss absorbency feature*• Minority interest, Preferred stock*
Deduction of Tier 1• Goodwill, Treasury stock, Deferred tax asset
• Investment in insurance (50% Tier 1 and 50% Tier 2)
Deduction of Common Equity Tier 1• Goodwill, Treasury stock*, Deferred tax asset• Intangible assets (new item: gradually deduct CET1, since 2014)
• Investment in insurance (Threshold Deduction) - Amount ≤ 10% of CET1, %RW = 250% (KBank’s Case) - Amount > 10% of CET1, deduct CET1
• Long-term subordinated debt• Hybrid Tier 1 (exceeds from Tier 1 limit)• General Provision
• Surplus on AFS equity (45%)• Surplus on land & premises (70% and 50%)
• Long-term sub-debt with loss absorbency feature**
• General Provision
Tie
r 1
cap
ital
Capital Definition Change (Consolidated)
Tie
r 2
cap
ital
Basel II Basel III
1
3
* Currently, KBank has no Hybrid Tier 1, Preferred Stock, or Treasury Stock** Long-term subordinated debentures must have loss absorbency feature, if issued
since 1 January 2013
2
1
97
Financial Sector Master Plan (FSMP) Implementation StagesFSMP III
(Y2015 onwards)FSMP II (Y2010-2014)
Looking forward to liberalizationFSMP I
(Y2004-2009)
Increase efficiency of the financial institutions system- ‘One Presence’ policy- Expand scope of business: ‘Universal Banking’
- New licenses for retail banks and foreign bank subsidiaries
Promote financial inclusion- Strengthen financial institutions (FIs) by promoting voluntary mergers
Protect customers
Source: BOT and KResearch
Reducing system-wide operating costs
Note: There are four types of Commercial banks in Thailand; Full service banks; Foreign bank branches; Retail banks; and Subsidiary
Further development based on FSMP II results Another feasibility
study in light of empirical results No official
announcement regarding FSMP III
Streamlining regulationsTackling remaining NPLs and NPAs(Allow banks to partner with private firms to work on raising attractiveness of NPAs, promote efficiency in the trading of NPLs and NPAs by establishing an NPA Information Center, and encourage write-offs of fully provisioned ‘doubtful of loss’ loans)
Promote competition- Encourage voluntary mergers to lower operating costs- Enhance the role of existing service providers (Liberalization of branch network, widen business scope, upgrade qualified retail banks to commercial banks, and expand branch network of foreign banks)
- Introduce new entry to fill gaps and create value-added - Reduce government ownership in the commercial banking sector
Promote financial access- Facilitate bank expansion of business, as well as support Specialized FIs in focusing on providing services to the populations without access to banks
- Introduce new service providers with microfinance expertise into the system
Promote development of financial products that help support risk management Enhance information system for risk management Push for draft/review of necessary financial laws to support risk management and
an expedited resolutions to NPLs Promote information technology utilizationDevelop human resources in the financial sector
Promoting competition and access to financial services
Strengthening financial infrastructure (including market liberalization, increased access for foreign financial institutions via grants of licenses for some business areas, and permission for an increased number of branches and ATMs)
98
31 Dec 2010: TAS Implementation
TAS 19: Employee Benefits(KBank early adopted in 4Q10; the formal effective date is January 1, 2011)
Use actuarial techniques to determine retirement reserve for eligible staff
TAS 12: Income Taxes (KBank early adopted)(KBank early adopted in 4Q10; the formal effective date is January 1, 2013)Use deferred income tax concept to record tax asset/ liability
BOT’s New Financial StatementPresentation/Convention
New and reclassified presentation lines in financial statement in order to align with revised TAS
1 Jan 2011: New financial statement presentation
IFRS 9 (IAS 39), IFRS 7 & IAS 32: Financial Instruments
Thai banks have implemented a new provisioning rule under IAS 39, since December 2006Thai banks have complied with IAS 39 when reporting embedded derivatives, since 2008
Full IFRS Conversion
4Q10 2013 2019 (Tentative)2014
TFRIC 13: Customer Loyalty Programmes
Deferred portion of income for reward credit granted
TFRS Conversion
TAS 21: Effects of Changes in Foreign Exchange Rates
Translate ‘Functional Currency’ to ‘Presentation Currency’
TFRS 8: Operating Segments
Disclose operating results for each key segment
TAS/TFRS Implementation
2015
TFRS 13: Fair value Measurement
Clear required factors and disclosure about fair valuation
TFRS Conversion
2016
TFRS 4: Insurance Contracts
Measure insurance liability based on cash flow estimation
Additional disclosure regarding risk exposure
TFRSConversion
TFRS and IFRS Implementation*
Note: TAS = Thai Accounting Standard; TFRS = Thai Financial Reporting Standard; TFRIC = Thai Financial Reporting Interpretations Committee * Only financial and disclosure impact to Thai Banks
99
Updates on the Deposit Protection Agency (DPA)
Insured Deposit Under new Royal Decree
11 August 2012 – 10 August 2015 Up to Bt50mn
11 August 2015 – 10 August 2016 Up to Bt25mn
11 August 2016, onwards Up to Bt1mn
DPA Objectives and Missions
Amount of Insured Deposits Insured deposits include deposits and accrued interest denominated in Thai Baht accounts,
excluding non-resident Thai Baht accounts Blanket guarantee will be gradually phased-out to a limited coverage of Bt1mn per
depositor per institution Until 2011, Thai banks paid 0.40% per year of the daily average deposit amount (paid in
June and December), excluding deposits in foreign currencies and deposits from financial institutions not insured by the DPA
Since January 27, 2012, the contribution rate has increased from 0.40% to 0.47%, of which 0.46% is paid to the BOT to manage FIDF debts* and 0.01% is paid to the DPA
Royal Decree on an extension of deposit protection coverage was announced in the RoyalGazette on September 24, 2012
Deposit Accounts in Thailand (as of November 2015)
Enhanced understanding of the deposit protection scheme Close cooperation with related authorities to maintain stability of the financial institution system Establishment of an appropriate system for premium collection and sound management of the Deposit Protection Fund Development of an effective information system to ensure fairness of the deposit protection scheme, with accurate and rapid reimbursement Management according to Good Governance Principles and in compliance with international standards established by the International
Association of Deposit Insurers
Source: DPA, Bank of Thailand (BOT), KBank, KResearch
* According to the BOT announcement in the Royal Gazette, per the authority of the emergency decree dated May 11, 2012, financial institutions are required to pay 0.46% of the average deposit amount, B/Es, debt instrument (excluding the amount counted as capital), borrowings, and securities transactions under repurchase agreements, beginning January 27, 2012
Deposits (Corporate and Retail Deposits) # of Accounts % Amount (Bt mn) %
Less than Bt1mn 86,903,571 98.5% 2,722,360 22.5%More than Bt1mn, but less than Bt25mn 1,285,139 1.5% 4,233,794 35.0%More than Bt25mn, but less than Bt50mn 22,641 0.03% 808,929 6.7%
More than Bt50mn 19,379 0.02% 4,316,170 35.7%Total 88,230,730 100.0% 12,081,253 22.5%
100
Government Policy
101
Sources and Uses of Public Funds
Tax Revenue + Non-Tax Revenue
(Bt2.33trn)
Borrowing under FY2016 Budget Act
(Bt390bn)
+
Budget Planning
FY2016 Budget(Bt2.72trn)
=General Budget
(Bt2.18trn or 80%)+
Investment Budget(Bt0.54trn or 20%)
Budget Execution
Budget Disbursement
(96% target disbursement rate
+ carry-over)
FY2016 Budget
Extra-Budget Borrowing Quasi-Fiscal Instrument
Extra-Budget Borrowing under
Special Act/Decree
Government has no policy for using extra-budget borrowing to finance investment projects; however, the PPP and IFF are preferable choices for funding
SFIs taking deposits, borrowing, as well as government subsidy
Quasi-fiscal activities
(e.g Soft Loan Program)
General Administration (Bt949.5bn or 35%) Defense Debt services
Economic Services(Bt577.3bn or 21%) Promote R&D program to
enhance national innovation Subsidize SOEs
(e.g. Infrastructure project, free bus and train service policy) Infrastructure/Agricultural
Development
Social and Community Services (Bt1,193.2bn or 44%) Disaster Aids Universal Healthcare
Note: Thai government's fiscal year (FY) begins on 1 October and ends on 30 September of the following year.
102
344 282 250 250390
1.913.7
0
200
400
600
800
1,000
FY2012 FY2013 FY2014 FY 2015F FY 2016F
Bill
ion
Bah
t
Budget Deficit Financing Extra-budget borrowing
Government Fiscal Budget
Economic Policies
Key Points Implementation Process Possible Impacts/ Expected Budget
2015 Budget Act
2016 Budget Act
FY2015 budget at Bt2.575trn with a deficit of Bt250bn
FY2016 budget at Bt2.72trn with a deficit of Bt390bn
FY2015 Effective date: October 1, 2014 after
announcement in the Royal Gazette on September 29, 2014
FY2016 Effective date: October 1, 2015 after
announcement in the Royal Gazette on September 25, 2015
Government spending will help maintain economic momentum
Fiscal sustainability to remain manageable in the near-term; however, continued debt creation, both from budget deficit and other borrowings, may impact long-term fiscal sustainability
Note: - FY2012 is actual data. FY2013, FY2014, FY2015 and FY2016 budget deficits are based on budget documentation, whereas extra-budget borrowing is projected by KResearch
National Legislative Assembly (NLA) passed regular budget for FY2016
Government plans to use PPP as an alternative funding source for infrastructure projects to offload its fiscal burden
In addition to growth in commercial bank loans, government funding activities may affect liquidity in the system
- Thai government's fiscal year (FY) begins on 1 October and ends on 30 September of the following yearSources: MOF, KResearch (as of January 2016)
103
FY16 target 4M FY16 actual
Unused FY16Budget
Total BudgetBt2.72trn
Bt2.61trn(96%)
Bt1.05trn (39%)
Bt1.46trn (61%)
- General Budget Bt2.18trn
Bt2.13trn (98%)
Bt0.96trn (44%)
Bt1.17trn (56%)
- Investment BudgetBt0.54trn
Bt0.47trn (87%)
Bt0.09trn (16%)
Bt0.38trn (84%)
Note : Debt to GDP has declined since January 2015, due to a change in GDP computation
Source: Ministry of Finance (MOF), Fiscal Policy Office (FPO), and Public Debt Management Office (PDMO)
Public Debt to GDP and Fiscal Budget
Public debt to GDP ratio was 44.64% as of December 2015, still under the 60% limit set under the fiscal sustainability framework
Thai government is committed to keeping the ratio of public debt to GDP under 50%
44.64
38
40
42
44
46
48
5,000
5,500
6,000
6,500
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15
% to
GD
P
Billi
on B
aht
Public Debt % to GDP
Public Debt
Government budget disbursement rate for 4MFY2016 is 38.6%, above the 37.5% in 4MFY2015
FY2016 budget disbursement target is 96%, unchanged from FY2015
13.220.9
29.7
38.6
13.420.4
29.837.4
42.6
51.458.4
64.772.0
80.085.4
92.4
0
10
20
30
40
50
60
70
80
90
100
Oct
Nov
Dec
Jan
Feb
Mar Apr
May Jun Jul
Aug
Sep
% C
umula
tive
Budg
et D
isbur
sem
ent
Rate
(%)
FY 2016 FY 2015FY 2014
Budget Disbursement Rate
104
Government Policy: Long-term and Short-term PoliciesLong-term policies
Transport Infrastructure Development Plan: The Action Plan on Transport (Urgent Phase) 2016-2017 worth Bt1.796trn
approved by the Cabinet in November 2015. The project will reduce logistic costs, increase transportation speed of goods and people, as well as connect Thailand to neighbors along the East-West and North-South Economic Corridors
Digital Economy: The National Broadcasting and Telecommunications Commission (NBTC)
awarded 4G licenses in 1800 MHz and 900 MHz worth Bt81bn and Bt152bn The Cabinet approved Bt15bn to be spent on the expansion of broadband
internet access
BOI Measures for Supporting Private Investment: The Cabinet approved tax and non-tax incentive measures to support private investment, such as Special Economic Zones (SEZs), six targeted clusters, and ten targeted industries as new engines of growth
Promote the establishment of an international headquarters (IHQ) and an international trading center (ITC) in Thailand: to help Thailand become one of the key trading nations in the region
Join the Regional Comprehensive Economic Partnership (RCEP): to deepen economic cooperation among sixteen countries and promote export sector
Energy Policy: reform petroleum concessions and energy price structures, including an LPG subsidy
Tax Reform: reform tax collection, generate sufficient revenue for the government, and boost competitiveness for local businesses, especially SMEs
Legislation overhaul: covering social justice, consumer protection, human-trafficking, and business and financial law
Short-term policies Government Budget: Higher fiscal budget deficit in FY2016: a deficit of Bt390bn in FY2016 vs a
deficit of Bt250bn in FY2015: provide more money to support Thai economy An additional central budget of 56 billion baht for FY2016: Bt15bn to be spent
on the expansion of broadband internet access, Bt8.3bn on replenishing the state coffers, and Bt32.6bn on projects to strengthen and push the country forward in line with the national reform plan
Short-term Stimuli: Low income aids: provide funds to villages, allocate money into community
investment projects Tax incentives to induce private spending: give personal tax income rebate up
to Bt15,000 for domestic spending on hotel bills and tour packages, double (200%) corporate income tax deduction for staff training/seminar expenses, and personal income tax deduction of up to Bt15,000 for shopping during the festive season from December 25-31, 2015
Provide financial support and tax incentives for SMEs: special loan rate for SMEs, lower credit guarantee fee for SMEs, venture capital for SMEs, and tax-exemption for targeted start-up SMEs
Property sector stimulus: lower transfer and mortgage fees: 20% tax deduction for five years to individuals (first-time home buyers), including special loan rate from Government Housing Bank (GHB)
Rubber aid program: The government will buy rubber directly from rubber growers at Bt45/kg for up to 100,000 tons to use for road construction and processed rubber products
Sources: Newspaper and KResearch (as of January 2016)
105
The Action Plan on Transport (Urgent Phase)Budget (Bt bn)
1. Bangkok and Vicinity Mass-Transit Systeme.g.
• Bangkok mass-transit routes under MRTA (Pink Line, Yellow Line, Orange Line, and Purple Line)
• Mass-transit routes under SRT (Dark Red Line and Light Red Line)
368
2. Motorway e.g. 3 routes (Pattaya to Mab Ta Phut, Bang Pa-in to NakhonRatchasima, and Bang Yai to Kanchanaburi)
160
3. Dual-Track Trains e.g. 5 dual-track train lines (Jira junction to Khon Kaen, Prachuabkirikhan to Chumphon, Mab Kabao to Jira junction, Lopburi to Paknampo, and Nakhon Phathom to Hua Hin)
118
4. Air Transport (Suvarnabhumi Airport expansion phase 2) 49
5. Marine Transporte.g. Harbour development project at Laem Chabang Port and railway container depo at Laem Chabang Port phase 1
5
6. Rail Transportation Cooperation • Thai-Chinese Rail Project
(Nongkhai to Nakhon Ratchasima to Map Ta Phut, Bangkok to Kaeng Khoi)• Thai-Japanese Rail Project
(Bangkok to Chiang Mai) • Thai Private Sector Rail Project
(Bangkok to Pattaya to Rayong, Bangkok to Hua Hin)
1,096
Total 1,796 Source : Office of Transport and Traffic Policy and Planning, Newspaper, KResearch(as of January 20, 2016)
The Action Plan on Transport (Urgent Phase) 2016-2017, worth Bt1.796trn, approved by Cabinet in November 2015; aimed at facilitating social stability and economic growth
Plans for some projects in 2016-2017
Notes: - Pink Line (Khae Rai to Min Buri); Yellow Line (Lad Prao to Samrong);
Orange Line (Thailand Cultural Center to Min Buri); Purple Line (Tao Poon to Bang-Sue); Dark Red Line (Bang Sue to Rangsit)
- EIA = Environmental Impact Assessment; SOE = State of Enterprise; PPP = Public-Private Partnership; MRTA = Mass Rapid Transit Authority of Thailand; SRT = State Railway of Thailand
The Action Plan on Transport (Urgent Phase) 2016-2017 (Bt1.796trn)
106
Budget Disbursement Schedule for the Action Plan on Transport (Urgent Phase)
Budget Disbursement Schedule (FY2015-2025)
Notes: - Thai government's fiscal year (FY) begins on 1 October and ends on 30 September of the following year- PPP = Public-Private Partnership; SOE = State of Enterprise; MRTA = Mass Rapid Transit Authority of Thailand;
SRT = State Railway of Thailand
Source : Office of Transport and Traffic Policy and Planning and KResearch (as of January 20, 2016)
Regular Investment
Budget, 4.7%
Government Borrowing,
70.5%
PPP, 21.0%
SOE, 3.1%
The Motorway Fund, 0.8%
Type of Projects
The budget for FY2015 has disbursed Bt1.44bn (for the Pattayato Mab Ta Phut motorway project).
Thai government will gradually invest in transport infrastructure projects; bidding for several projects in 2016; construction to begin in 2017, with peak expected around 2018-2019
PPP fast track measure has approved to quicken PPP process from 22 months to 9 months
1.44
58.40
170.48
250.88
278.68
238.83 245.80
252.73
176.25
88.12
34.77
-
50.00
100.00
150.00
200.00
250.00
300.00
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025
Bill
ion
Bah
t
Source of Funds
107
Cabinet approved measures for supporting private investment xxxxSpecial economic zones (SEZs) (January 19, 2015)
Targeted provinces Launched a pilot project to set up 6 special economic zones in 5 provinces, namely Tak, Mukdahan, Sa Kaeo, Songkhla, and Trat Second phase of special economic zones to be established in 5 additional provinces – Chiang Rai, Kanchanaburi, Nong Khai,
Nakhon Phanom, and Narathiwat
Incentives Projects in special economic zones: Tax exemption for first 8 years and 50% tax reduction in following 5 years
Source : Newspaper, KResearch (as of November 27, 2015)
BOI Measures for Supporting Private Investment
Six targeted clusters (September 22, 2015)
Targeted clusters and provinces Super Clusters (Four clusters): Automobile and Parts, Electronics Appliances and Telecommunications, Petrochemicals and Other Environmental Friendly Chemical Products, and Digital
Other Clusters (Two clusters): Garment and Clothing and Processed Food 9 Provinces: Nakorn Ratchsrima, Ayutthaya, Pathum Thani, Prachin Buri, Chachoengsao, Chon Buri, Rayong, Chiang Mai, and
Phuket
Incentives Super Clusters: Tax exemption for first 8 years and 50% tax reduction in following 5 years Other Clusters: Tax exemption for first 3-8 years and 50% tax reduction in following 5 years Non-tax incentives: granting land ownership to foreign juristic persons, and granting permanent residence to foreign specialists
Accelerating private investment (November 3, 2015)
Incentives Additional 1-4 year tax exemption, not to exceed 8 years, and 50% tax reduction in following 5 years for BOI applications from January 1, 2015 to June 30, 2016; must operate business in 2016
10 targeted industries for new engines of growth (November 17, 2015)
10 targeted industries First S-Curve (to enhance efficiency of existing production, boosting short and medium-term of economic growth) consists of Next Generation Automotive, Smart Electronics, Affluent Medical and Wellness Tourism, Agriculture and Biotechnology, and Food for the Future
New S-Curve (for new growth) consists of Robotics, Aviation and Logistics, Biofuels and Biochemicals, Digital, and Medical Hub
Incentives Expected to be announced in December 2015
108
Short-term StimuliMeasures for boosting the economy at the village and district levels (September 1, 2015)
Village funds (Bt60bn) 7-year loans to village funds by GSB and BAAC Village funds will lend to villagers: rate = 0% for 1-2 years; rate <= 4% for 3-7 years Villagers prohibited from using the funds to refinance their existing debts
Community investmentprojects (Bt36bn to districts)
Interior Ministry will grant Bt5mn each to 7,255 districts (tambons) to implement community investment projects by the end of 2015; financing will come from central fund in FY2015-2016
Small state-run projects (Bt40bn) Government will accelerate budget disbursement for small state-run projects worth < Bt1mn by the end of 2015
Cabinet approved economic packages to stimulate the economy: village / district levels, SMEs, and property
Measures to help SMEs (September 8, 2015)
Soft loans (Bt100bn) GSB will provide Bt100bn in loans with 0.1% interest rate to financial institutions Financial institutions will lend those loans to SMEs with no more than 4% interest rate
Loans guaranteed by TCG (Bt100bn)
TCG will absorb as a loss the first 15% of NPLs and share loss of the second 15% of NPLs with financial institutions Guarantee fee will drop to 0% in 1st year, 0.5% in 2nd year, 1.5% in 3rd, and 1.75% for the remaining years
Lower corporate income tax rate Corporate income tax rate for SMEs will be lowered to 10%, from 15-20%, in 2015-2016
Venture capital fund for SMEs GSB, KTB, and SME banks will provide Bt6bn in venture capital funding for start-up SMEs with insufficient capital
5-year tax exemption forstart-up SMEs
Start-up SMEs registering during Oct 2015 - Dec 2016 and in targeted industries (such as food processing, high technology or innovation, or digital) will receive a 5-year tax exemption
Source : Newspaper, KResearch (as of October 14, 2015)Note: GSB = Government Savings Bank; BACC = Bank of Agriculture and Agricultural Cooperatives; TCG = Thai Credit Guarantee Corporation; GHB = Government Housing Bank
Measures to help property sector (October 13, 2015)
Housing transfer / mortgage fees Cut housing transfer fee to 0.01% from 2% and mortgage fee to 0.01% from 1% (effective: Oct 29, 2015 - Apr 28, 2016)
Extra incentives for homebuyers 20% tax deduction for five years to individuals (first-time home buyers) buying houses priced below Bt3mn
GHB special loans (Bt10bn) GHB will set aside Bt10bn in housing loans to help low income customers
109
Ongoing Government Measures to Assist Cost of Living
Source: KResearch
Measures Details
Household Assistance Train and Bus Fares: A subsidized fare for buses and trains; some buses and trains provided for free Electricity: A full subsidy on electricity bills for households using less than 50 units of electricity per month
Energy Prices Diesel Fuel: Government intends to restructure diesel fuel prices to reflect global pricesNGV and LPG Price: Government lowered the NGV and LPG subsidy, allowing retail selling prices to reflect global market prices NGV price increased from Bt12.00/kg to Bt13.50/kg, beginning September 8, 2015 LPG prices are as follows: Household sector: refrained from subsidizing general households. Current
household LPG price is Bt22.29/kg. However, the government is exempting the oil fund levy for low income households; LPG price for low income households is Bt18.13/kg
Transport sector: adjusted to market price at Bt22.29/kg Industrial sector: adjusted in line with relevant production costs, currently at
Bt22.96/kgFT Rate: Fuel Adjustment Tariff (FT) Rate for electricity is set to increase by less than the actual cost (from September-December 2015, FT rate at Bt0.46/unit )
Value-added-tax (VAT) Rate On July 14, 2015, the Government announced the following VAT Rates: Maintain the 7% value-added-tax (VAT) rate until September 30, 2016 After September 30, 2016, the VAT rate will be increased to 10%
110
Highlight of Legislation and Politics
Highlight of Legislation
The Amendment of the Bankruptcy Act (No. 8) B.E. 2558 (Effective Aug 18, 2015)- Shorten time of debt repayment by giving authority to official receivers in considering and examining the creditors’ claims for debt repayment (previously, only courts had
this authority)- Extend the time for claims submission in case of force majeure (previously, the time for claims submission was 2 months after sequestration announcement)
Business Security Bill, B.E. 2558 (Passed third reading Aug 7, 2015)- Create a new type of contract, a business security contract, which provides that a person, known as the “security provider”, grants a security interest over property to
another party, typically a financial institution known as the “security receiver” - Allow more types of assets to be used as security, such as machinery, inventory, accounts receivables, businesses, and intellectual property; also, borrowers do not
need to transfer assets to creditors or pledge assets to creditors
Act of Facilitation for Consideration of Approvals from Government Agencies B.E. 2558 (Effective Jul 21, 2015) - Require government agencies to disclose a manual for licenses, permits, registrations, renewals, paying taxes, customs procedures, etc. to public; manuals are to include instruction, process, consideration criteria, processing time period, document requirement, fees, etc.
- Assign the Public Sector Development Commission (OPDC) to review process and report to the cabinet when agencies cannot pass the service standard
Passed several decrees by the Cabinet to solve concerns over Thai airliners raised by the International Civil Aviation Organization (ICAO) and illegal, unreported, and unregulated (IUU) fishing activities in the country
Highlight of Politics
13 Aug 15: NRC handed over the reform framework to the Prime Minister who rejected the draft of the new constitution; NRC dissolved by the interim constitution
(5 Oct 15): NCPO selected 200-member National Reform Steering Assembly (NRSA)
(5 Oct 15): NCPO appointed 21 members of a new constitutional drafting committee (CDC)
(29 Jan 16): CDC to public the draft constitution
National Legislative Assembly (NLA): passed 116 laws, as of November 25, 2015
Note: NRC = National Reform Council; NCPO = National Council for Peace and Order; CDC = Constitutional Drafting Committee Source : Newspaper and Royal Gazette, compiled by KResearch (as of January 20, 2016)
The CDC to public the draft constitution on January 29, 2016
111
Thailand Economic Figures
112
USD/THB: End Period Interest Rate Trend
Currency and Interest Rate Outlook
Bt
Note: F is estimated by KBank Capital Markets Research (as of February 15, 2016)
Global market volatility and economic weakness around the world created doubts whether the Fed can continue to raise Fed fund rate further in 2016
U.S. job market conditions showed resilience even though inflation remains well below the policy target of 2%. Fed policy rate is expected to increase by another 50bps in 2016, compared with the Fed’s view of a 100bps hike
Narrowing interest rate differentials between U.S. and Thai interest rate likely to be reflected in THB weakness in the long-term. USD/THB is expected to rise towards 38.00 by year-end 2016, but short-term strength is expected in 1Q16, as the US economy weathers decelerating growth momentum.
MPC voted unanimously to hold policy rate at 1.50% for the sixth straight time after their February meeting, citing the current level is deemed accommodative
MPC expected to maintain its interest rate at 1.50% throughout 2016 to support gradual domestic recovery
More emphasis likely to be placed on FX channel; a weaker THB should enhance export competitiveness while boosting liquidity for exporters in terms of THB revenue
0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0.25-0.50 0.75-1.00
2.00 3.25 2.75 2.25 2.00 1.50 1.50
0.001.002.003.004.00
Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16F
% p
.a.
Fed Funds rate BOT's 1-Day Repurchase rate
30.1531.54 30.60
32.68 32.91
35.97 38.00
3032343638
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16FUSD/THB
113
Monthly Economic Conditions: December 2015 - January 2016 Key economic figures in
December 2015 suggest Thai economy was modestly improving
Private consumption accelerated on temporary factors
Exports fell sharply, amid plummeting demand from China and ASEAN as well as headwind from falling petroleum prices
Current accounts reported a surplus, due to a sharp drop in oil imports
January 2016 headline CPI declined, due to a price decline on vegetable and fuel items
Sources: Bank of Thailand (BOT), Ministry of Commerce (MOC), University of the Thai Chamber of Commerce (UTCC),
Office of Industrial Economics (OIE), and Office of Agricultural Economics (OAE)
Units: % over-year, otherwise indicated 20162014 2015 2Q 3Q 4Q Sep Oct Nov Dec Jan
Private Consumption Index (PCI) 1.1 1.1 -0.3 0.3 2.9 2.7 1.8 3.7 3.0Non-durables Index 0.8 3.8 3.7 3.3 4.1 1.9 2.4 5.6 4.2Durables Index -19.3 -6.7 -11.3 -10.4 -2.0 -8.7 -7.2 -1.4 2.2Non-residents expenditure Index 2.9 6.3 7.0 7.5 3.8 7.7 3.4 4.5 3.6Passenger Car Sales -41.4 -19.1 -27.3 -24.9 -11.7 -25.5 -19.5 -12.0 -5.2Motorcycle Sales -15.1 -3.7 -5.0 -16.4 -3.7 -5.9 -12.8 0.5 2.3
Private Investment Index (PII) -1.3 1.0 0.2 1.2 2.2 1.2 1.9 1.5 2.2Domestic Sales Volume of Cement 3.8 -8.4 -12.2 -11.3 -0.8 -3.2 -2.3 -1.7 1.4Imports of Capital Goods at constant prices -2.0 -0.8 -5.3 -0.3 3.1 -4.7 1.9 11.5 -4.0Commercial Car Sales -26.8 -2.3 -16.1 -0.3 17.2 1.2 7.2 15.7 26.3Domestic Machinery Sales at constant prices 6.4 9.8 13.4 10.0 5.8 5.9 5.8 7.7 3.9
Manufacturing Production Index -5.2 0.3 -0.3 0.9 0.2 -0.3 -0.8 0.3 1.3Capacity Utilization 65.1 64.7 62.2 64.3 63.4 64.9 63.8 63.6 62.9
Agriculture Production Index 0.4 -5.3 -10.8 -10.6 -3.2 -10.4 -7.4 -26.2 42.9Agriculture Price Index -6.2 -5.9 -5.8 -4.7 -5.8 -4.2 -5.5 -6.8 -4.9
No. of Tourists -6.5 20.4 36.9 24.9 3.7 8.9 1.0 5.1 4.7Exports (In terms of US Dollars) -0.3 -5.6 -5.5 -4.7 -7.9 -5.4 -8.0 -6.6 -9.1
Unit Value -1.0 -2.3 -1.8 -2.9 -2.7 -3.1 -2.7 -2.6 -2.7Volume 0.7 -3.4 -3.8 -1.8 -5.4 -2.3 -5.4 -4.2 -6.6
Imports (In terms of US Dollars) -8.5 -11.3 -10.2 -14.5 -13.2 -21.3 -21.3 -8.5 -8.7Unit Value -1.8 -10.8 -9.7 -11.7 -11.0 -12.6 -11.5 -11.0 -10.5
Volume -6.8 -0.6 -0.5 -3.2 -2.4 -10.0 -11.1 2.8 2.1Trade Balance (USD millions) 24,583 34,593 7,860 9,616 9,637 4,001 4,331 2,086 3,220Current Account (USD millions) 15,418 34,839 6,119 7,225 13,055 1,843 5,178 2,997 4,879
Headline CPI 1.9 -0.9 -1.1 -1.1 -0.9 -1.07 -0.77 -0.97 -0.85 -0.53Core CPI 1.6 1.1 1.0 0.9 0.8 0.96 0.95 0.88 0.68 0.59
2015
114
Most Thai households are less concerned with cost of living, as reflected in the 3-month Expected KR-ECI rising for the fifth straight month to an 11-month high of 47.5 in December. This was attributable to the government’s attempts to revive domestic economic activities and low consumer goods prices
KR Household Economic Condition Index (KR-ECI)
KR Household Economic Condition Index (KR-ECI) Components of 3-month Expected KR-ECI
Notes: - The KR Household Economic Condition Index (KR-ECI) has been devised by KResearch to monitor household sentiment toward economic conditions atthe current level and over the next three months. Any reading above 50 reflects positive sentiment and below 50 negative sentiment.
- Research sample includes households in Bangkok and Metropolitan Area (BMA). - Components of KR-ECI are household savings, household income, household debt, household expenses excluding debt, and prices of consumer goods.
45.2
47.5
40
42
44
46
48
50
Aug-14 Dec-14 Apr-15 Aug-15 Dec-15
KR-ECI
Current KR-ECI 3-month Expected KR-ECI
Source: KResearch42.7
42.1
46.4
49.7
49.5
43.8
44.7
47.3
49.4
49.5
35 40 45 50 55
Prices of consumer goods
Household expenses excluding debt
Household debt
Household income
Household savingsDec-15
Nov-15
3-month Expected KR-ECI
Source: KResearch
115
3.0% 2.2%7.5%
1.4%
-4.0%
2.2%
-20%
0%
20%
PCI PII Car Sales Construction Materials
Imports of Capital Goods
Consumer's Durable
%Y
oY
3Q15 4Q15 Nov-15 Dec-15
Jan-16 CCI and BSI declined amid rising concern over economic prospects
Dec-15 Private consumption picked up further, driven by an increase in car sales before new excise tax took effect
Dec-15 MoM growth of foreign arrivals accelerated, as tourist high season approached
Dec-15 Exports fell, due to suppressed petrochemical prices as well as falling demand from ASEAN and China
-9.1%-8.7%
-20%
-10%
0%
10%
0
5,000
10,000
15,000
20,000
25,000
Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15
% Y
oY
Expo
rt Va
lue
(USD
Milli
on)
Exports Exports (excluding gold)% YoY for Exports % YoY for Exports exc Gold
Economic Condition Highlights: December 2015 - January 2016
75.5
48.5
30
35
40
45
50
55
60
6567697173757779818385
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15
BSI
CC
I
Consumer Confidence Index (CCI) Business Sentiment Index (BSI)
Sources: Bank of Thailand (BOT), Ministry of Commerce (MOC), University of the Thai Chamber of Commerce (UTCC),
and Office of Industrial Economics (OIE)
19.2
22.4
26.5 24.8
29.9
3.0
17.2% 18.9% 18.7%
-6.7%
20.5%
5.0%
-10%-5%0%5%10%15%20%25%
0.005.00
10.0015.0020.0025.0030.0035.00
2011 2012 2013 2014 2015 Dec-15
No of Foreign Tourist Arrival % Tourist Arrival YoY (RHS)
Mill
ion
Pers
on
116
Dec-15 MPI and CapU picked up slightly, due to a rise in demand ahead of year-end
Activity in the property market was slow, in line with economic activity
Property prices rose at a slower pace in 3Q15,in line with economic conditions
-2-1012345
-0.5
0.0
0.5
1.0
1.5
Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16
%Yo
Y
%M
oM
Headline CPI (MoM-lhs) Core CPI (MoM-lhs)Headline CPI (YoY-rhs) Core CPI (YoY-rhs)
57%
-10%-100%
0%100%200%300%400%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
% Y
oY
Construction areas permitted in municipal zoneCondominium Registration Nationwide New Housing registered in BKK and Vicinity
10.8
5.82.3
-5.0
0.0
5.0
10.0
15.0
20.0
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
% Y
oY
Single House (With Land) Townhouse (With Land) Land
+0.59% YoY
-0.53% YoY
Economic Condition Highlights: December 2015 - January 2016
Jan-16 Headline inflation declined on falling food and energy prices
Sources: BOT, MOC, OIE, and REIC (Real Estate Information Center)
1.3
62.87
35
45
55
65
75
-12-10
-8-6-4-2024
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15
%Ca
pacit
y Utili
zatio
n Rat
e
%Yo
Y of
MPI
MPI (lhs) %Capacity Utilization (rhs)
117
Exports and Imports: 2015
Source: Bank of Thailand (BOT), BOP Basis = Balance of Payment Basis
Japan15.4%
ASEAN19.0%
China20.3%
Middle East9.0%
EU8.9%
USA6.8%
Others20.5%
ASEAN 25.7%
EU10.2%
China11.1%
Japan9.4%
USA11.2%
Hong Kong5.5%
Middle East4.9%
Others21.9%
Total Imports (BOP Basis)2015
USD Millions Weight %YoY Imports, f.o.b. (BOP basis) 177,516 100.0% -11.3%
Machinery, Equipment, and Supplies 42,336 23.8% -4.4%Fuel 29,717 16.7% -37.4%Electronics Parts and Electrical Appliances 26,175 14.7% -0.4%Materials of Base Metal 16,441 9.3% -15.9%Non-durable Consumer Goods 12,723 7.2% -0.3%Chemicals 11,468 6.5% -12.5%Automotive 9,289 5.2% -4.2%Agricultural and Agro-manufacturing Products 9,018 5.1% 1.2%Plastics 7,292 4.1% -4.0%Non-monetary Gold 7,232 4.1% 9.4%
Total Exports (BOP Basis)2015
USD Millions Weight %YoY Exports, f.o.b. (BOP basis) 212,109 100.0% -5.6%
Automotive 32,423 15.3% 2.5%Electronics 32,082 15.1% -3.7%Agro-manufacturing Products 25,651 12.1% -5.4%Machinery & Equipment 19,247 9.1% -0.2%Electrical Appliances 12,047 5.7% -2.1%Petro-chemical Products 11,678 5.5% -11.8%Metal & Steel 9,212 4.3% -4.1%Other Manufacturing Products 8,188 3.9% -3.3%Petroleum Products 8,163 3.8% -28.3%Jewellery 7,060 3.3% -1.3%
Exports by Country
Top 10 Exports by Product (BOP Basis) Top 10 Imports by Product (BOP Basis)
Imports by Country
118
0
50,000
100,000
150,000
200,000
250,000
2011 2012 2013 2014 2015
ASEAN EU China Japan USA Middle East Others
US
D M
illio
n
0
50,000
100,000
150,000
200,000
250,000
2011 2012 2013 2014 2015
ASEAN EU China Japan USA Hong Kong Middle East Others
Top 10 Exports by Product (BOP Basis) Top 10 Imports by Product (BOP Basis)
Export and Import Data: 2011 – 2015Exports by Country
Source: Bank of Thailand (BOT), BOP Basis = Balance of Payment Basis
Imports by Country
21.9%4.9%5.5%9.4%11.2%
11.1%10.2%25.7%
4.7% 5.7%
11.8%
22.5%5.4%
9.8%10.7%
10.9%24.3% 18.0%
21.8%
6.4%15.6%16.9%8.5%
12.8%
19.0%8.9%
20.3%15.4%
6.8%9.0%
16.2%7.8%
13.3%18.4%5.9%
13.3%
25.0%
16.1%8.1%
14.8%
19.8%5.0%12.9%23.2%
16.6%9.1%15.0%16.4%5.8%14.1%
22.8%20.5%
US
D M
illio
n
5.8%
Total Imports (BOP Basis)2015
USD Millions Weight %YoY Imports, f.o.b. (BOP basis) 177,516 100.0% -11.3%
Machinery, Equipment, and Supplies 42,336 23.8% -4.4%Fuel 29,717 16.7% -37.4%Electronics Parts and Electrical Appliances 26,175 14.7% -0.4%Materials of Base Metal 16,441 9.3% -15.9%Non-durables Consumer Goods 12,723 7.2% -0.3%Chemicals 11,468 6.5% -12.5%Automotive 9,289 5.2% -4.2%Agricultural and Agro-manufacturing Products 9,018 5.1% 1.2%Plastics 7,292 4.1% -4.0%Non-monetary Gold 7,232 4.1% 9.4%
Total Exports (BOP Basis)2015
USD Millions Weight %YoY Exports, f.o.b. (BOP basis) 212,109 100.0% -5.6%
Automotive 32,423 15.3% 2.5%Electronics 32,082 15.1% -3.7%Agro-manufacturing Products 25,651 12.1% -5.4%Machinery & Equipment 19,247 9.1% -0.2%Electrical Appliances 12,047 5.7% -2.1%Petro-chemical Products 11,678 5.5% -11.8%Metal & Steel 9,212 4.3% -4.1%Other Manufacturing Products 8,188 3.9% -3.3%Petroleum Products 8,163 3.8% -28.3%Jewellery 7,060 3.3% -1.3%
23.1%
9.9%10..2%11.7%9.5%24.6%
5.1%
26.1%
10.3%11.0%9.6%10.5%
21.8%5.2%5.5%5.1%21.6%
10.0%9.7%
11.9%9.8%
26.0%
119
82
.46
31
.58
27
.04 12
6.1
11
3.4
7
12
7.1
1
27
6.1
8
0
100
200
300
400
500
Invest
ment
Valu
e(B
t bn)
2011 2012 2013 2014 11M15
447.3
983.6 1,026.7
724.7 783.9
0
200
400
600
800
1,000
1,200
2011 2012 2013 2014 11M15
Inve
stm
en
tV
alue
(B
t bn
)
Source: BOT, MOC, OIE
(Data as of January 2016)
Capacity Utilization by Key Industries
Investment value of BOI-approved applications (by Industry)*
Source: The Board of Investment of Thailand (BOI)Note: *Figures above indicate investments of approved projects requesting investment promotion benefits from BOI
Investment value of BOI-approved applications (Total)*
Economic Condition Highlights: CAPEX and Investment Cycle
52.87
45.60
50.29
69.04
73.66
63.25
45.27
81.52
89.07
61.71
0 50 100 150
Food and Beverage
Tobacco
Garments
Paper and Paper Products
Chemical & Chemical Products
Rubber & Plastic Products
Basic Metal
Vehicles
Integrated Circuits & Parts
Household Electrical Appliances
2012
2013
2014
2015 11M
Avg 04-08
+24 %YoY-29% YoY
+4% YoY+120% YoY
-9% YoY
120
136 145 135 125
43 16 20 13 20 37 49 46 51 50 62 75 84 62
101 131 134 95 91
284
190 132
44
3
4 9 14 31 52 68 64 66 81 68
58 117 86 102132
114 85 72
0 50
100 150 200 250 300 New Housing Completions New Projects Launched
19.4
9.0 8.913.5
4.9 2.910.9
7.48.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
Land Single House Townhouse
Supply Side: New Housing Completions and New Projects Launched in BMR*
1,000 Units
Demand Side: Transferred Properties in BMR*
Price Growth of Properties
Sources : National Economic and Social Development Board (NESDB), BOT, Real Estate Information Center (REIC), Agency for Real Estate Affairs (AREA), and KResearch Note: * Including Condominium, Single House and Townhouse; BMR = Bangkok and Metropolitan Area
% (YoY)
Property Market: Property stimulus measures to help boost property market later this year Outstanding Mortgage Loans to Individuals and Property Developers to GDP
%
Avg. price growth in last 5-years (2010-2014): Land 6.1%; Single House 2.9%; Townhouse 4.7%
Avg. 5-year price growth before the crisis (1992-1996): Land 9.4%; Single House 6.3%; Townhouse 6.3%
1,000 Units Property market may grow at a slow rate due to lack of confidence
amid the economic slowdown; however, property stimulus measures to help boost property market in 4Q15
Mortgage loans to GDP is higher than the pre-crisis level, due to several factors such as changes in consumer behavior, intense competition among banks, and a more accessible credit market
Outstanding loans granted to property developers (including contractors) to GDP was 6.2% as of 3Q15, still lower than the pre-crisis level
Supply Side: in 9M15, new housing projects declined due to economic slowdown
Demand Side: property stimulus measures boosted the number of transferring properties in the last quarter of 2015
Prices: property prices increased due to an increase in business costs
Mortgage loan NPLs among Thai commercial banks remained low at 2.6% in 3Q15, compared with 2.2% in 2014
146 161 178 151 159 182 170 124 132
0
200
2008 2009 2010 2011 2012r 2013r 2014 9M14 9M15
10
.1 12
.2 13
.6
15
.2 16
.8
16
.3 14
.8
13
.4
12
.7
13
.1
13
.7
15
.1
16
.0
16
.0 15
.8
16
.1
17
.7
17
.5
18
.0
18
.3
19
.4
21
.2
22
.1
12
.4
13
.5
13
.6
13
.9 16
.0
15
.9
15
.3
9.9
7.2
6.8 7.6
8.0
7.9 7.4
7.1
7.3 6.6
5.8 6.1
6.2
5.8
6.0 6.2
0
5
10
15
20
25
30
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
3Q20
15
% Outstanding mortgage loans to GDP% Outstanding loans to Property Developers to GDP
121
27.9% 28.1% 27.2%
0%
10%
20%
30%
40%
2009 2011 2013
Household Borrowing
Source: BOT, Bank for International Settlements (BIS), National Statistical Office (NSO), and KResearch
Household Borrowing to GDP
Household borrowing to GDP expected to edge up to 82.0% in 2015 and grow to 83.0 – 84.0% in 2016, with decelerated growth rate
Household borrowing to GDP is higher than pre-crisis level, due to factors such as changes in consumer behavior, intense competition among banks, and a more accessible credit market
Thailand’s household debt to GDP is comparable to other countries; debt service ratio of Thai households is still well below 40%**, indicating the household debt situation is unlikely to trigger any problems in the foreseeable future
NPL ratio for consumption loans of Thai commercial banks increased slightly to 2.8%, due to economic slowdown
Old Definition: Data from 1991 – 1997: lending from commercial banks and SFIs to individual persons for consumption onlyNew Definition: Data from 2010 onwards: takes into account individual persons’ outstanding loans from all types of financial
institutions, including savings Co-ops and non-banks
Old Definition New Definition
Cross-Country Comparisonof Household Debt*
Debt Service Ratio of Thai households**
% NPL for Consumption Loans of Thai Commercial Banks
19
.0%
19
.4%
13
.5%
9.7
%
6.2
%
5.0
%
4.1
%
3.4
%
3.1
%
2.3
%
2.0
%
1.9
%
2.2
%
2.4
%
2.6
%
2.7
%
2.8
%
0%
10%
20%
30%
20012002200320042005200620072008200920102011201220132014
1Q2015
2Q2015
3Q2015
* Thailand and Malaysia Household Debt as of 3Q14, Other Countries as of Y2013
122
Key Regulations for Mortgage Loans
Note: * The effective date is postponed from January 2012, due to the severe floods in 2011
Source: The Bank of Thailand
Price Condominium HouseLoan to Value
(LTV)Risk
WeightsEffective Date
≥ Bt10mn > 80%
75%
March 2009
< Bt10mn > 90% January 2011
< Bt10mn > 95% January 2013*
≥ Bt10mn ≤ 80%
35%
March 2009
< Bt10mn ≤ 90% January 2011
< Bt10mn ≤ 95% January 2013*
The BOT has taken preventive actions and closely monitored risk in the property market
Risk weights for mortgage loans dropped from 50% to 35% under Basel II since 2008
However, the BOT announced revised criteria in 2009-2010 on mortgage loan risk weights with a different effective date
123
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Jan-15 Apr-15 Jul-15 Oct-15 Jan-16
Federal Funds Target Rate -Upper BoundFederal Funds Target Rate -Lower Bound
Fed Policy Normalization and Thailand Economic Impacts
Fed tapered QE program in January 2014; program concluded in October 2014
Fed began raising the interest rate in December 2015, from 0-0.25% to 0.25-0.50%
In instances where QE tantrum results in drastic fund outflows, Thailand’s external stability will likely be maintained; FX reserves should be more than enough to meet all obligations
Thai banking system liquidity slightly decreased due to managing financial costs; CAR and NPL ratios remained good (17.3% and 2.78% as of 3Q15, respectively), with strong profit-generating capacity (Bt153.8bn in 9M15)
Fed raised interest rates for the first time in almost a decade in Dec-15
Source: KResearch and *FOMC (Jan2016)
Thailand has enough FX reserves to meet all internal and external obligations
Thai commercial banks have high liquidity AssetsLiquid assets in Thai commercial banks increased
Note: Liquidity includes cash as well as net positions in short-term money market and net investmentsSource: Kresearch, KBank Capital Markets Research (as of January 14, 2016)
2,57
5,19
22,
391,
171
2,31
5,44
62,
335,
370
2,36
5,27
82,
266,
117
2,20
2,94
22,
262,
846
2,26
8,93
62,
278,
965
2,38
4,27
32,
565,
987
2,52
9,75
32,
596,
077
2,50
7,58
82,
633,
982
2,68
6,14
62,
616,
960
2,43
5,71
3.00
2,
369,
357.
00
2,22
5,28
2 2,
194,
630
2,25
3,58
12,
396,
289
92
93
94
95
96
97
98
99
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Dec
-13
Jan-
14Fe
b-14
Mar
-14
Apr-1
4M
ay-1
4Ju
n-14
Jul-1
4Au
g-14
Sep-
14O
ct-1
4N
ov-1
4D
ec-1
4Ja
n-15
Feb-
15M
ar-1
5Ap
r-15
May
-15
Jun-
15Ju
l-15
Aug-
15Se
p-15
Oct
-15
Nov
-15
Perc
ent
Milli
on B
aht
Excess Liquidity LTD+BE
10.9
157.5
0
50
100
150
200
$ Billion
FX Reserves
Net Forward Position
53.6
42.7
51.1
0
50
100
150
200
$ Billion 3 months of imports
Reserves backing banknotes
ST External Debt
$168.4 Billion$147.4 Billion
Source: BOT, KResearchLast Update: January 8, 2016
124
High international reserve / Imports (Import Coverage)
High international reserve ratio / External debts
Low foreign holding ratio in Thai government bonds
Thailand’s external balances remain relatively strong compared to peers
10.8
8.9
14.3
10.1
7.4
10.0
7.3
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
India Indonesia Phillippines South Korea Malaysia Singapore Thailand
Nu
mb
er
of
Mo
nth
72.9%
35.0%
106.7% 89.9%
142.1%
111.6%
0%
50%
100%
150%
India Indonesia Phillippines South Korea Malaysia Thailand
37.6%
10.9%
30.5%
42.5%
16.5%
0%
10%
20%
30%
40%
50%
Indonesia South Korea Malaysia U.S. Thailand
Thailand’s economy and financial markets are able to withstand impacts from QE tapering and its aftermath due to:
High import coverage (international reserves/monthly imports) compared with the IMF’s three month import coverage guideline
More than 100% of external debt covered by international reserves
Low portion of foreign holdings in Thai government bonds compared with other countriesNotes: 1) Thailand‘s international reserve was USD157.5bn (as of December 2015)
2) Foreign investor holdings (as of September 2015): - Thai Government bonds: Bt571bn or 16.2% of the total Bt3.6trn in Thai Government bonds- Thai bonds: Bt571bn or 6% of the total Bt9.8trn in Thai bond market size
Source: Bloomberg, KResearch (data as of December 2015) Note: Retrieved from Asia Bond Monitor (Volume November 2015), based on September 2015
data
Source: Asian Development Bank
Source: Bloomberg, KResearch (data as of September 2015)
125
Net impacts of decreasing oil price for the Thai Economy Continued decline in global crude oil price should benefit countries with net oil import, including
Thailand Lower price pressure should improve the efficiency of companies’ cost management, especially
businesses with high energy costs, including transportation and fishery industries
Positive Impact Industries
Negative Impact Industries
Rubber: due to competition from synthetic rubber Agricultural products used in alternative energy: sugar
cane, cassava, and oil palm
Lower crude oil price benefits 2015 GDP
Du
bai
Average 2014: 96.7 USD/bbl
2015: possibly droppingto 50-60 USD/bbl
Boost trade surplus: gains from less energy imports outweigh losses from tourist revenues and exports which depend on those oil exporters (Russia & OPEC countries), as well as related agricultural products
Lower inflation: a 10% drop in crude oil price would lead headline inflation to decrease by around 0.4%
Enable domestic energy restructuring: the Oil Fund status becomes surplus and the government receives more excise taxes on diesel
Better manage production costs: particularly industries with high energy costs
Increase consumer purchasing power (except farmers): given widespread product price drops
Note: Calculated from I-O Table
126
Exports Drought
Short-term Challenges Sub-par global economic recovery, especially China Falling commodity prices, especially oil Depreciation of major trading partners’ currencies, especially EUR
and JPY
Limited water balance for start of new crop cycle (May-October), leaving a marginal chance to grow off-season crops
Key Structural Problems
High dependence on China’s market Changing demand in electronic products and loss of competitiveness
in some areas (e.g., HDD) More effort needed to comply with global fishing standards
Low crop productivity Agricultural systems rely heavily on monoculture cropping
Key Affected Products Electronics and Electrical Appliances Fishery and agriculture products Petrochemical products
Crops needing a large amount of water, such as rice
Short-term Measures from Authorities and Related Parties
Extending products to catch up with changing consumer trends Enhancing practices to comply with international standards regarding
IUU fishing and human trafficking issues Setting up export promotion board
Setting drought problems as the national agenda Providing support for affected farmers via BAAC, such as
debt suspension, interest rate reduction, and debt contract extension. Farmers also encouraged to grow more drought tolerant crops or seek temporary work elsewhere
Long-term Measures from Authorities and Related Parties
Negotiating FTA and regional trade agreements, including TPP Relocating factories to GSP eligible countries Promoting BOI’s privileges which grant merit based on
competitiveness enhancements Enhancing productivity
Improving water supply management efficiency Enhancing water allocations from 4 major dams in Chao
Phraya River area Seeking more sources of groundwater under Bt372.9mn
budget Stronger endorsement of zoning arrangement for farmers’
sustainable livings
Challenges: Exports and Drought
Source: KResearch, Data as of January 20, 2016
Export recovery expected, amid many challenges that could derail the pace of recovery Drought due to El Nino reducing rainfall, especially in Northern and Central Thailand. Drought may be an obstacle
to a pick up in farm income
127
020,00040,00060,00080,000100,000120,000140,000160,000180,000200,000
-20,000-15,000-10,000
-5,0000
5,00010,00015,00020,00025,00030,00035,000
US
D M
illi
on
US
D M
illi
on
Current Account (LHS) FX Reserves (RHS)
Bond Yields
Current Account and FX Reserve
Other FiguresThai Bond Market Size (Gov't and Private bonds)
Foreign Holdings of Thai Bonds
4,88
8,17
7
5,08
5,98
0
6,11
8,23
7
6,96
2,13
6
7,32
7,10
0
8,57
9,95
7
8,99
1,81
9
9,28
7,28
8
9,82
4,84
0
57% 56%63% 64% 65% 69% 70% 71% 74%
0%10%20%30%40%50%60%70%80%
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
Per
cen
t to
GD
P
Mil
lio
n B
aht
Thai Bond Outstanding (LHS)
Bond Market Size to GDP (RHS)
49,0
15
76,4
55
65,8
92 280,
459
418,
549
710,
467
707,
902
683,
214
571,
019
1.0% 1.5% 1.1%
4.0%
5.9%
8.3% 8.4% 7.4%
6.0%
0%1%2%3%4%5%6%7%8%9%
-100,000
100,000
300,000
500,000
700,000
900,000
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
%o
f T
ota
l B
on
d M
arke
t
Mil
lio
n B
aht
Foreign Holding Outstanding (LHS)
% of Thai Bond Market (RHS)
1.4 1.5 1.5 1.6 1.72.0 2.1 2.2 2.4 2.4 2.5
2.8
1.00
2.00
3.00
4.00
6M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y
Dec-13 Dec-14 Dec-15 Jan-16
%
* Data as of Jan 14, 2016
*
USD157.5bn (Dec15)
(+)USD29.6bn (Nov15)
%
128
Other FiguresHousing Loans/GDP
Credit Card Loans/GDP
Personal Loans/GDP
Source: BOT, NESDB
Note : Housing loans represent outstanding housing loans for personal consumption granted to individuals of householders by financial institutions (including Commercial banks, Finance companies, Credit financiers, SFIs, and Insurance companies but excluding Saving Cooperatives and others financial Institution)
Note : 1) Credit card loans represent outstanding credit card loans from commercial banks and non-banks, excluding SFIs, saving cooperatives and others financial Institutions
2) GDP as of 2Q15
Note : 1) Personal Loans represent outstanding personal loans under supervision (including commercial banks and non-banks, excluding SFIs, saving cooperatives and others financial Institution)
2) GDP as of 2Q15.
179,
276
189,
227
196,
599
216,
427
228,
903
261,
553
290,
425
318,
141
298,
571
2.0% 1.9% 2.0% 2.0% 2.0% 2.1% 2.2%2.4%
2.2%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
050,000
100,000150,000200,000250,000300,000350,000
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
3Q
201
5
Per
cen
t to
GD
P
Mil
lio
n B
aht
Credit Card Loans Outstanding (LHS)
211,
809
229,
137
213,
745
187,
491
213,
236
257,
132
299,
142
312,
851
321,
384
2.3% 2.4% 2.2%
1.7% 1.9%2.1%
2.3% 2.4% 2.4%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
050,000
100,000150,000200,000250,000300,000350,000
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
3Q
20
15
Per
cen
t to
GD
P
Mil
lio
n B
aht
Total Personal Loans Outstanding (LHS) Personal Loans to GDP (RHS)
1,4
38
,03
9
1,5
60
,72
4
1,7
09
,89
7
1,8
85
,13
9
2,0
34
,13
7
2,2
63
,55
2
2,5
10
,04
8
2,7
81
,00
1
2,9
50
,83
5
15.8% 16.1%17.7% 17.5% 18.0% 18.3%
19.4%21.2%
22.1%
0%
5%
10%
15%
20%
25%
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
3Q
15
Pe
rce
nt t
o G
DP
Mill
ion
Bah
t
Housing Loans for Personal Consumption (LHS)
Housing Loans to GDP (RHS)
129
4.8% 5.6% 3.9% 10.1% 5.8% 14.3% 11.0% 9.5% 7.0%
14.0%13.5%
6.3%
15.7%13.1%
19.6%
11.1%
9.7%7.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2007 2008 2009 2010 2011 2012 2013 2014 Nov-15
%Y
oY
Credit Card Loan Growth Spending Growth
Other Figures
Credit Card Statistics
Loans to GDP as of 2014
Source: BOT, NSO, CEIC, and KResearch
Thai Banks’ Net Loans and NPLs
Note: Data on China, Korea and Japan include loans from commercial banks as well as financial institutions, the rest include loans only from commercial banks Note : %YoY Net loans represent growth of net loans in 14 Thai commercial banks from CB1.1
Note: The credit card statistics number includes foreign bank and non-bank credit cards
GDP Per Capita
-0.5% 12.5% 15.1% 14.0% 10.5% 4.2% 3.6% 3.7%
5.3%
4.1%
3.0%2.5% 2.3% 2.3% 2.5%
2.9%
0.0%
2.0%
4.0%
6.0%
-2.0%0.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%16.0%
20
09
20
10
20
11
20
12
20
13
20
14
2Q
20
15
3Q
20
15 % G
ros
s N
PL
s t
o T
ota
l lo
an
s
%Y
oY
%YoY Net Loan %Gross NPLs
10
8,9
55
11
9,6
35
12
9,0
89
13
6,5
85
13
5,1
44
15
0,1
17
15
5,9
26
16
7,5
01
17
4,3
38
17
6,9
58
8.3%9.8%
7.9%
5.8%
-1.1%
11.1%
3.9%
7.3%
4.08%
1.50%-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
-
50,000
100,000
150,000
200,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Baht
GDP Per Capita % YoY
130
1.81.5 1.4 1.4 1.5
1.0
0.6 0.5 0.6 0.60.8
0.0
0.5
1.0
1.5
2.0
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
No
v-1
5% o
f U
ne
mp
loym
en
t
Other Figures
Net Foreign Direct Investment
Population and Labour force Unemployment Rate
Source: NESDB, National Statistical Office (NSO), and KResearch
% YoY
Million
Foreign Direct Investment Position by Countries
%
Note: - FDI refers to equity investment, lending to affiliates, and reinvested earnings; investment in equity is treated as a direct investment when the direct investors own 10% or more of ordinary shares- Net FDI is the net flow of FDI data in each year as per flow concept- FDI position by countries is an investment outstanding that nonresident investors have with resident enterprises as stock concept
-3.2% -22.2%
107.8%
-84.9%
469.5%
23.4%
-75.8%-6.1%
288,337
224,315
466,071
70,392
400,904
494,520
119,689155,535
-200.0%
-100.0%
0.0%
100.0%
200.0%
300.0%
400.0%
500.0%
0
100,000
200,000
300,000
400,000
500,000
600,000
2008 2009 2010 2011 2012 2013 2014 10M15
THB
Mill
ion
FDI %YoY
65.7 66.3 66.9 67.3 67.6 67.9 68.4 68.6
36.9 37.7 38.4 38.6 38.5 38.939.8
38.6
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
2007 2008 2009 2010 2011 2012 2013 2014
Population Labour force
17.0% 19.8% 18.2% 17.1% 17.0% 17.0%
17.5% 16.5% 17.0% 16.1% 16.9% 14.4%0.9% 1.2% 1.4% 1.9% 1.7% 1.8%
31.7% 30.0% 31.7% 34.6% 34.8% 31.0%
9.2% 9.3% 9.6% 8.2% 7.7%7.3%
23.6% 23.2% 22.1% 22.2% 21.9% 28.6%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
2010 2011 2012 2013 2014 3Q2015
Asean EU China Japan USA Others
131
Average Projected GDP Growth around 5 %
Source: IMF (October 2015) and KResearch
Size of ASEAN Economy (USD Trillion)
Member of ASEAN Economic Community (AEC)
Source: The Association of Southeast Asian Nations and KResearch
CompetitiveEconomic
Region
EquitableEconomic
Development
IntegrationWith theGlobal
Economy
Single Market and Production
Base
AEC by 2015
Since December 31, 2015, ASEAN has transformed into the “ASEAN Economic Community,” with free movement of goods, services, investment, and skilled labour, and a freer flow of capital
GDP Thailand ASEAN
Size of Economy (GDP) in USD Trillion for 2015 0.37 2.50
2016 GDP Forecast 3.0% 4.6%
Contribution to GDP (by NESDB) 2012 Y2016F
Greater Bangkok : Provinces 45 : 55 44 : 56
Note: - Size of economy for 2015 from IMF and compiled by KResearch (as of October 14, 2015)- 2016 GDP forecast is projected by KResearch (as of October 14, 2015) - ASEAN economic growth: average growth among ASEAN member countries in national currencies- Greater Bangkok includes Nonthaburi, Samut Prakarn, Nakorn Pathom, Samut Sakhon, and Patumthani Since Dec 31, 2015, skilled labour under ASEAN Mutual
Recognition Agreement (MRA) will have a freer flow
132
• The materialization of regional supply chain will help maintain the region’s competitiveness through labor division
• The establishment of Thailand’s SEZs along the border is to tap into plentiful resources of CLM
• Consumer markets in CLMV will grow along with GDP increase and urbanization
1) Regional Connectivity
• The emergence of AEC and RCEP, as well as other FTAs, will attract even more FDIs into the region, especially from the +3 countries
• 2015 marks the completion of ASEAN Free Trade Zone amidst CLMV lowering their import tariffs close to zero
• Thailand will constitute the center of production in Mainland SEA, while low-value, labor-intensive processes will be moved to CLMV
3) High Growth Environment2) The Pluralism of Economic Integration
• Strategically located, Thailand is the most essential area for GMS connectivity
• Physical connectivity and ease of customs formalities will spur regional trade and promote regional supply chain
Note: CLMV = Cambodia, Laos, Myanmar and Vietnam; GMS = Greater Mekong Subregion; SEZs = Special Economic Zones, RCEP = Regional Comprehensive Economic Partnership
AEC as a Growth Driver to Thailand
133
For Further Enquiries, Contact KASIKORNBANK Investor Relations:
Chief Investor Relations Officer Tel (66) 2470 2673-4
Fax (66) 2470 2680
Investor Relations Team Tel (66) 2470 6900-1
Tel (66) 2470 2659-62
Fax (66) 2470 2690
Email: [email protected]
IR Website www.kasikornbank.com Investor Relations
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134
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135
