Even though Krungthai Card is eager to regain leadership of the credit card industry by 2018, it would prefer to accomplish that through organic growth rather than acquisitions.
"We have no plan to acquire credit card portfolios from other financial institutions because Thais use credit cards for payment less than cash. That means we can win over those people for many years," Rathian Srimongkol, president and CEO of KTC, said last week.
Thailand would eventually have to shift from a cash-based to cashless country and credit cards were a proper tool to handle their spending, he said.
The company, however, would consider offers from other companies if they want to sell their credit card receivables.
After joining KTC in January 2012, Rathian spent two years engineering an impressive turnaround from a huge loss of Bt1.62 billion in 2011 to a profit of Bt255 million in 2012 and a remarkable profit of Bt1.28 billion in 2013.
The turnaround and cost-to-income adjustment have been achieved, but not a respectable growth rate for KTC credit cards.
KTC’s credit card growth was single digit over the past two years while the industry posted double-digit growth.
In 2012, the credit card industry boomed at 27-per-cent growth, while KTC eked out 2 per cent, and even though the industry slowed to 10 per cent in 2013, KTC could do no better than 4-5 per cent.
This year the company has set its sights on 15 per cent, while the market is expected to do 10 per cent.
The remarkable profit assures that KTC can pour money into marketing activities to attract new credit cardholders who will lead the rise in spending.
KTC plans to issue 400,000 new cards this year, up from 130,000 annually in past years. KTC has 1.5 million credit card accounts.
Pittaya Vorapanyasakul, executive vice president, said the company would resume marketing activities with merchants and provide segmentation campaigns to tap middle-income to upper-income customers, who account for 80 per cent of its customer base.
It will focus more on people in their first jobs in an effort to build long-term relationships.
Chutidej Chayuti, senior executive vice president and chief financial officer, said KTC required at least Bt10 billion in funding to support its growth plan.
Under organic growth, KTC targets annual profit of at least Bt1 billion. Profit above Bt1 billion together with retained earnings and the debenture issue is sufficient without injecting new capital to serve growth for five years.
KTC has registered capital of Bt6.1 billion and total assets of Bt51 billion. It aims to double assets to Bt100 billion in five years. The company will issue debentures worth Bt7-8 billion in the second half to refinance debt and issue another tranche worth Bt4 billion to back up growth.
The new coupon rate is set at no more than 4.9 per cent, similar to the 4.8 per cent of past issues.