KTB eyes lending to govt projects as key mechanism for growth

On a day when new KTB president Payong Srivanich announced the five tasks the bank had initiated in the hope of becoming a trusted bank partner, he also highlighted the mechanisms the lender had adopted to support government policies given it is a state-owned bank and a listed company.
“We should grow from this key backbone, in which our rivals don’t have strength, and we will reinforce this backbone to increase our market share in segments that relate with the government policies,” he said.
The government is embracing the Thailand 4.0 model, with KTB providing lending to the country’s 10 main industries and focusing on the supply chain of small and medium-sized enterprises. 
The national e-payment system is one focus of KTB in the servicing of government employees. Payong believes the scheme will finally merge white collar and government employees into the same segment, creating a business opportunity for KTB.
For the retail sector, KTB wants to be the market leader for government and state enterprise employees. For the business sector, KTB aims to be the market leader in the agricultural and service sectors. 
In the context of KTB’s support of government projects, Payong said that did not necessarily mean the bank would directly lend to the government. Rather, he said it wanted to dominate the market share in segments related to the government such lending to the contractor customers and government and state enterprise employees.
KTB must gain a 20-30 per cent market share in all projects related with government projects, he added.
He said KTB’s loans to the government accounted for 10 per cent of its total outstanding loans, down from almost 20 per cent in the past four years. With the return to focusing on state projects, that loan proportion this year should reach 12 per cent, he added.
The bank acknowledged that rivalry among specialised financial institutions is a reason for the reduction in its government loans during the past four years.
As a hybrid bank, KTB cannot accommodate much lending to the government because its has higher costs than SFIs, Payong said.
Commercial banks pay 0.47 per cent to the state, of which 0.46 per cent is the premium payment to the Financial Institutions Development Fund and the remaining 0.01 per cent goes to the Deposit Protection Agency. SFIs are not be required to make this payment.
Another cost for commercial banks is corporate income tax, which SFIs don’t have to pay either.
“In terms of costs, we might not compete [with SFIs] but we have to change our mindset from giving loans for profit to giving loan for liquidity management,” Payong said. 
He believes the bank this year will return to growth, with its lending forecast to grow more than 5 per cent after a drop last year.
KTB has the highest ratio of non-performing loans of the top-tier banks and Payong admitted the bank’s NPLs would gradually increase until early in the second quarter as a result of the SME segment. 
But he said the bank would increase its mechanism for NPL management, as in the past it only had a mechanism for restructuring debt.
Normally, banks write off debt and sell bad debt to asset management companies.
KTB is doing the same but as a state-run bank, it has it to be more cautious than other banks.
KTB yesterday reported a net profit of Bt29.96 billion for last year, up 13.18 per cent from Bt26.47 billion year on year. Its outstanding loan dropped by 6.08 per cent last year to Bt1.904 trillion while NPLs rose to 3.97 per cent from 3.2 per cent year on year.