KTB started preparing for crisis two years ago

What is your economic forecast for this year?

Bank performance will be in line with the economy. Overall economic growth this year is worse than last year, and so is our bank's performance. The US economy seems to be stabilised, but there are still several risk factors that affect customers' credit. The overall situation has still not recovered, and personally I believe we have still not seen the bottom. However, there are some good signs in rising orders of imports and exports, although we don't know whether it is destocking or real demand.

What is the bank's lending situation?

The target of lending growth at 56 per cent this year is still achievable. [Over the first five months of the year, KTB extended Bt160 billion of new loans. which represents lending growth of 4 per cent.] There is still investment in new projects such as expansion of energy projects, plus property projects in the central business district. But there has been no expansion for the export sector, as exporters' capacity still remains high.

There is some investment in infrastructure projects. Government investment is the catalyst for private investment, and it's needed. The government needs to understand that business operators will suffer for the next one to two years. We need to help them survive this tough period, by for instance measures to help them retain employees. Although banks would like to provide credit, we cannot give loans to those who make big losses as they might not be able to repay the debts.

What is your view of the trend in interest rates?

I believe we can keep deposit rates at this level. Personally, I don't agree that we should cut deposit rates from this level. Many people rely on returns from deposit accounts for their living. Cutting rates too much will hurt them, and we would not be able to stimulate the economy. The only good point for a rate cut is that the government's funding cost for borrowing would be cheaper.

What is the situation on nonperforming loans?

NPLs will continue to rise. This also depends on how well banks manage bad loans. It's a big issue, though it's not as big as for banks in the US. Our bank's NPLs will increase slightly this year. [As of endMarch, KTB's gross NPLs were 7.46 per cent or Bt90.52 billion of outstanding lending, and its net NPLs were 5.22 per cent or Bt61.8 billion.]

How has the bank managed bad loans so far?

We have prepared for this for two years, as we saw the bad signs.

We created a debtrestructuring department in 2007. Earlier, those who provided loans looked after the debt-restructuring.

This year, we have allocated staff in the lending unit to take care of not only new customers but existing customers' financial health. The health checks will be more regular.

We've done our own stress test and passed satisfactorily. As for our staff, many of them had been through the 1997 financial crisis. They've been through many cases.

Please compare the situation in 1997 with today.

The 1997 financial crisis was much worse than today's.

There were so many cases [of bad loans] then that we almost couldn't handle the situation. Now we're well prepared, so there won't be a problem this time.

Unlike the period before 1997, when they were aggressive in their expansion, our customers have also been very cautious over the past two to three years. They had all suffered before [from the 1997 crisis].

Their debttoequity ratio is low, while most listed firms are in good shape.