Kasikornbank (Kbank) has set an ambitious lending-growth target of 8-13 per cent next year, to reach Bt84 billion, based on the bank's own forecast that Thailand's gross domestic product will grow 4-5 per cent next year.

The wide range of the lending-growth target can be ascribed to lingering uncertainties domestically and intensified competition in the banking industry, president Prasarn Trairatvorakul explained at a meeting in Phuket.

Thailand's fourth-largest bank in terms of assets is expected to reach the lower end of its 6-9 per-cent target range for lending growth this year, he said, adding that loans for small- and medium-sized enterprises (SMEs) would be the main driving force behind the bank's loan performance.

SME loans for the first nine months of this year rose 26 per cent, compared with the full-year target of 16 per cent.

Prasarn said the bank's average net-interest margin next year was expected to be about 3.8-3.9 per cent, slightly down from this year's target of 3.9-4 per cent. The main cause for this downward trend is an expected fall in the country's policy signal rate, which is expected to occur about the second quarter of next year.

The bank expects its fee-based income to amount to more than 20 per cent of total revenues next year, after this year's estimate of 15-20 per cent. This is attributed to the bank's development of unique financial products.

"Banking products currently on the market are commodities that can be imitated by others, and the banking industry competes in terms of pricing. This narrows margins. Therefore, the development of financial products [that are different] is a challenging task for our group," he said.

Kbank plans to continue building up its K brand by offering new products and services under the K Group, as well as upgrading its information-technology system. This is expected to increase the bank's cost-to-income ratio, which should be about 55 per cent next year, up from this year's 50 per cent.

Prasarn said the bank did not need to make additional reserve provisions next year.

Normally, it sets aside a bad-debt reserve provision of Bt1 billion each quarter. Its coverage ratio is currently 66 per cent, or about Bt30 billion, compared with the level of its non-performing loans (NPLs), which is Bt53 billion.

The bank will see its NPLs decline from 6.52 per cent to 5 per cent of total loans next year if the International Accounting Standard (IAS39) is not taken into account.

However, when the bank applies the new standard, as required by the Bank of Thailand, its bad loans will fall by 3 per cent.

Somruedi Banchongduang

The Nation

Phuket