What is TCAP’s future business plan?
The Company invests in businesses which constitute a fully integrated financial group. It holds shares in companies in various sectors including commercial banking, hire purchase and leasing, life assurance and insurance as well as securities. In the past, the Company had excess cash from selling its equity stake in Thanachart Bank for the purpose of the bank’s merger with TMB Bank. The Company used the proceeds from the sale for making additional investments in the businesses it already invested in. These included TMBThanachart Bank, MBK, Ratchthani Leasing, and MBK Life Assurance. In addition, the Company established Thanachart Plus which provides asset-based financing services.
What is the amount of cash TCAP currently has on hand and what are TCAP’s targets for acquiring additional stakes in TMBThanachart Bank and Ratchthani Leasing?
The Company plans to maintain minimum liquidity of 2 billion baht. However, in case the Company needs to use money, such as in making additional investments in the businesses it already invests in or in giving loans to Thanachart Plus, it will make preparations by issuing debentures to raise more cash. As regards additional investments in TMBThanachart Bank and Ratchthani Leasing, this will depend on the timing and the prices which must be appropriate. However, the Company is authorized by the Bank of Thailand to hold no more than 24.99 percent equity stake in TMBThanachart Bank.
Can investors expect a dividend payout of 3 baht per share in 2022?
The Company makes efforts to provide shareholders with clarity on dividend payments so that shareholders could anticipate the cash inflows to be received. In the past, the Company’s dividend payout per share increased step by step. In this connection, the Company tries to maintain or increase the dividend payout per share gradually. In 2020, the Company made the dividend payment at the rate of 3 baht per share. And for 2021, in case shareholders approved at the annual general meeting of shareholders, the Company would make a dividend payment at the rate of 3 baht per share. Likewise, for 2022, the Company expects that it could maintain the dividend payout rate at the same level. In the future, the dividend payout rate might increase in line with the performance which is expected to be higher.
Thanachart Plus has registered a strong growth. What is the growth target for 2022?
Currently, Thanachart Plus has expanded its asset-based financial services into a diverse range of businesses. In the beginning, focus was given to customers in the real estate sector. This year, Thanachart Plus has set a lending target of about 3 billion baht. And it is expected that, by the year end, the outstanding loan portfolio will amount to about 4 billion baht.
Thanachart Insurance has set a target of 10 billion baht for 2022 in terms of premiums received. Will and how the profit for 2022 increase?
In non-life insurance business, if a company registers a higher growth of premiums received, its profit will decline. This is mainly due to the fact that income from premiums received is recognized periodically while the expenditure such as the commission expenses are recognized in the one time period.
As regards the business operations of Thanachart Insurance in 2022, the current equity stake which TMBThanachart Bank has in Thanachart Insurance increases to 10 percent. As a result, Thanachart Insurance makes efforts to connect to TMBThanachart Bank’s customer base as well as various networks and platforms of the bank for the purpose of future business growth.
Does the Company plan to make additional investments in subsidiaries and associated companies and how?
At the beginning of 2021, the Company disclosed that the excess cash available to the Company would be used for making additional investments in the financial services providers in which it held equity stakes. Operating businesses in which the Company has expertise, these providers generate a good return. In the past year, the Company increased its shareholdings primarily in TMBThanachart Bank and Ratchthani Leasing. Currently, the prices of these two companies’ shares in the stock market already increased. As a result, the Company had to wait for a right timing and an appropriate opportunity to increase its shareholdings in both companies.
What would be the guidelines for managing the about 97 million treasury shares held by the Company?
The remaining 97 million treasury shares are due to be resold by the Company within 2023. Once they become due and the Company does not resell the amount of the treasury shares, it is necessary for the Company to reduce the capital by the amount of the remaining treasury shares.
From the Company’s point of view, which of its businesses is poised to register a remarkable growth in 2022?
The business which the Company is promoting strongly now is the asset-based financing service business which is operated by Thanachart Plus (T-Plus). This is mainly because the Company has spotted opportunities in two areas for doing such business, which include the following: (i) Since the loans are extended against collateral, the risk is not very high; and (ii) This is one way to increase the Company’s loan yield. In this connection, the customers of T-Plus are not the same as those of TMBThanachart Bank (TTB), mainly because T-Plus focuses on two groups of customers, to which the bank has limitations to give loans. These groups of customers include: (1) Those with highly volatile liquidity needs. For this group of customers, T-Plus is more flexible than the bank, as it can tailor-make lending products suitable for the financial needs of customers as well as their cash flows; and (2) Those in the real estate sector. In giving loans to this group of customers, T-Plus will primarily focus on the appraisal of the collateral to be pledged by the customers. In doing its business, T-Plus places emphasis on assisting customers and not on competing with the bank.
With regard to the year 2022, the Thai economy is likely to recover. It is also expected that the recovery will have positive impacts on the business operations of TTB and Ratchathani Leasing (THANI).
Tendency to grow of T-Plus and its NPL
It is expected that, by the end of 2021, the outstanding loans of T-Plus will amount to about 2.5 billion baht. In 2022, the loan portfolio will grow by about 2-3 billion baht. As regards the non-performing loans, the current NPL is nil. This is mainly due to the fact that the management teams of the Company and T-Plus have extensive experience and expertise in this business. In particular, not only the customers have been screened in an appropriate and efficient manner, but also the collateral against loans is carefully assessed.
Business operational plan of MBK-Life after acquisition of 100 percent equity stake in MBK-Life
The Company is currently in the process of implementing activities in several business areas. Emphasis is placed on marketing activities which include expanding business networks and entering into partnerships with various companies which are in lending business. The purpose is to introduce credit shield insurance products to these companies’ customers. On the other hand, as regards the existing customers of MBK-Life, most of them have purchased group life insurance policies. As a result, emphasis will be placed not only on maintaining good relationships with these customers but also on expanding the customer base and persuading them to use more products of MBK-Life.
Growth plan of the distressed asset management business
Business performance of asset management companies under Thanachart Group in 2021 improves, when compared to that of the previous year. The success in managing distressed assets in an efficient manner is mainly due to Thanachart Group’s expertise in debt restructuring negotiation as well as in selection of potential assets. Emphasis is placed on the small and medium-sized enterprises (SMEs), which is different from most of the asset management companies listed on the Stock Exchange of Thailand, which focus on retail customers.
Reduction of the tax rate in the third quarter of 2021
The Company has tax losses carried forward. In the third quarter of 2021, part of its income was from its own operations, that income did not have to pay tax. As a result, the tax rate decreased.
The Company’s outstanding liquidity
In early 2021, the Company informed shareholders that its outstanding liquidity amounted to about 10 billion baht. During the course of the year 2021, the Company made additional investments in TTB, THANI, MBK and MBK-Life. It also used its excess liquidity in giving loans through T-Plus. As a result, the Company’s outstanding liquidity currently amounts to about 3 billion baht. However, it is still the Company’s policy to maintain a certain level of liquidity for supporting its businesses.
The Company strives to maintain the level of dividend payments made to shareholders by taking into account the operating results, cash flows and maintenance of liquidity at an appropriate level. The purpose is to ensure shareholder confidence in investing in the Company’s shares. Based on its current assessment, the Company is still confident that its overall profit is enough for continuing to pay a dividend at the rate of 3.00 baht per share. In the past, the dividend payments which the Company made to shareholders increased continuously. As a result, it is possible to increase the dividend payment rate in the future, provided that its subsidiaries and associate companies achieve better operating results and are able to make dividend payments to the Company in line with the established policies.
What are the operational strategies adopted by the Company’s subsidiaries in the second half of the year?
The loan growth achieved by Ratchthani Leasing (THANI) since the beginning of this year is higher the established target. However, due to the stricter containment measures imposed by the government sector since the second quarter against the pandemic, THANI deems it appropriate to move cautiously in its loan expansion. As regards Thanachart Insurance (TNI), the company has been striving to increase diversity of distribution channels, aiming at expanding its customer base and lessening its dependence on selling its services through the branches of TMBThanachart Bank (TTB) while increasing other distribution channels. Regarding the branch channels, the good relationships between TNI’s teams and TTB’s teams have been strengthened. In this connection, appropriate selling systems have been put in place and trainings have been conducted for TTB’s staff, with an aim to promote sales of TNI’s services. The arrangements are in line with TTB’s intent to increase its non-interest income. As for Thanachart Securities (TNS), the company plans to increase diversity of income sources by offering products other than security brokerage services. Its product called “Zeal” has registered impressive growth. Also noteworthy is the company’s efforts to make more use of digital technology to reach wider markets. During the initial phase, the company has developed apps for enabling customers to open accounts more easily, to have access to more information, to trade more conveniently and more efficiently, and to receive various services more easily, among others.
In the past, the Company participated in its subsidiaries’ financial planning. As a result, each company has a strong financial structure with diversified funding sources, a good mix of short-term and long-term debts, and less dependence on funding from the Company, which is the policy it has established for the purposes of strengthening each company’s financial position and enhancing their preparedness for future growth.
Please give additional details about Thanachart Plus.
Thanachart Plus (T-Plus) operates asset-based financing service business with focus on real estate. In this connection, the Company has expertise in corporate finance business, which places emphasis on finding solutions for customers. On the part of T-Plus, it has more flexibility than most financial institutions in approving loans for customers. Loan approval is mainly based on collateral potential as well as customers’ ability to repay the principal and interest of the loan. The Company has spotted this business opportunity for supporting enterprises of medium size and above, amidst the situation in which some customers might be affected by the Covid-19 pandemic. Since only short-term or medium-term loans will be given with maturity of about 2-3 years, the interest rate charge will not be higher than 15 percent per annum while the loan-to-value (LTV) ratio will range from 50 percent to 60 percent. The Company expects that, by the end of this year, the outstanding loan portfolio will amount to about 2-3 billion baht with a growth target of about 2 billion baht per annum.
What is the Company’s dividend policy for 2021?
The Company attempts to keep the level of dividends it pays out to shareholders, taking into account the performance while maintaining an adequate level of liquidity. The purpose is to make shareholders feel confident of investing in the shares of the Company. Currently, based on its assessment, the Company is still confident that its overall profit is adequate for continuing paying the dividend payment at the rate of 3 baht per share.
Which type of lending business does the newly established company Thanachart Plus Co., Ltd., engage in and what are the related details?
Thanachart Plus Company Limited is an asset-based financing service provider, using real estate as collateral. Lending decisions will be based on potential collateral and the clients’ ability to repay principal and interest. The Company has spotted this business opportunity for supporting enterprises of medium size and above, amidst the situation in which some clients might be affected by the Covid-19 pandemic. Since the time of maturity will be either short-term or medium-term, the interest rate charge will be no more than 15 percent per annum while the loan-to-value (LTV) ratio ranges from 50 percent to 60 percent. The credit cost will be relatively low. The Company expects that, by the end of 2021, the outstanding loan portfolio will amount to about 2-3 billion baht. In this connection, the Company will use its excess liquidity which currently amounts to 8-9 billion baht, to increase the rate of return to shareholders.
Why did the life and non-life insurance expenses in the first quarter of 2021 decrease?
This was mainly due to the yield curve which markedly steepened in early 2021. As a result, the required reserve for insurance companies decreased. In addition, the steepening yield curve had positive impacts on interest income on investments of both life and non-life insurance companies.
Does the Company plan to make additional investment in shares of TMBThanachart Bank Public Company Limited (TTB)?
If the share price of TTB is at an appropriate level and the COVID-19 situation improves, the Company will consider making additional investment to increase its shareholding. The policy also applies to its equity stake in Ratchthani Leasing Public Company Limited (THANI).
What is the Company’s dividend policy for 2021?
The Company’s dividend payment for 2020 performance amounted to 3 baht per share. This consisted of two separate payments with the first one being 1.20 baht per share and the second one being 1.80 baht per share. The Company attempts to keep the level of the dividend payment to shareholders, aiming at maintaining the investors’ confidence in the shares of the Company. Based on its current analysis, the Company remains confident that its overall profit is likely sufficient for continuing paying dividends at the rate of 3 baht per share.
Why did the loan portfolio of Thanachart Leasing (THANI) contract in 2020?
The Thai economy had been fragile since before the Covid-19 outbreak. The fragile situation was aggravated further by the Covid-19 pandemic. THANI has been conducting its business affairs in a prudent manner. As a result, in the past year 2020, THANI’s loan portfolio contracted. However, the Company succeeded in strengthening the financial position of THANI. In particular, it not only supported THANI’s successful increase in portion of long-term debts but also helped THANI reduce the Debt-to-Equity (D/E) Ratio from about 5 percent to 3 percent. The Company expects that, after the Covid-19 situation improves, THANI will be well prepared for business growth and expansion. In fact, in the first quarter of 2021, THANI’s loan portfolio grew slightly compared to the year-end 2020. As regards its business operations, THANI continues to focus on hire purchase loans for new trucks. Emphasis is also being placed on business expansion of luxury vans, which remain a strong market segment not much affected by the economic downturn. On the other hand, THANI also cooperates with Thanachart Insurance Public Company Limited (TNI) in introducing insurance products for trucks, supercars and luxury cars to THANI’s customers.
How does the Company plan to invest in non-performing loans (NPLs) and non-performing assets (NPAs) for management?
The Company has not yet purchased any non-performing assets (NPAs) during the current period. However, there are still some NPAs owned by the Company. While it is no longer a financial conglomerate regulated by the Bank of Thailand, it plans to make additional investments in NPAs and NPLs. The objectives are not only to increase their values but also to enhance potential and opportunities for making gains from selling these assets in the future. As regards the purchases of NPLs, the Company continues to study and consider various available options. However, as they do not match its policy, investment decisions have been postponed for the time being.
Which businesses will be the Company’s growth businesses in 2021?
According to the business plan, all the Company’s businesses will be growth businesses. The related details are as follows:
- In 2020, Ratchthani Leasing (THANI) was cautious in giving loans, due to the economic contraction. The COVID-19 pandemic caused THANI’s outstanding loans to drop. However, net profit of THANI still represented a good rate of return. As for 2021, THANI will continue to implement the cautious lending policy, mainly due to the new wave of transmission during the period from the latter part of 2020 to early 2021. However, if the COVID-19 vaccine rollout is efficient and the vaccines reach a high percentage of the population in the second half of the year, various business sectors will recover. In particular, demand for truck hire purchases which will increase will augur well for THANI.
- In 2020 TNI sold its products and services through additional channels which included non-banks and external brokers. In this connection, the proportion of the sales revenue through such channels accounted for 43 percent in 2020, compared to 33 percent in 2019. As for 2021, TNI plans to increase sales through TMB’s branches. In addition, it plans to develop digital insurance and new products suitable for being offered through online channels. The objective is to enable customers to access protection in an easy, convenient, quick and safe manner. Importantly, TNI plans to make more use of new technology in its various work processes. In this connection, it aims not only to enhance its business potential and deliver services to customers and trading partners in a faster and more comprehensive manner but also to broaden its customer base.
- In 2020, brokerage business of Thanachart Securities Company (TNS) grew quite well, mainly due to positive impacts of the COVID-19 pandemic. As for 2021, TNS plans to improve its income structure by reducing dependency on securities brokerage fees and by placing more emphasis on other businesses such as trading of unit trusts, derivatives and ZEAL, an investment portfolio management for positive investment return without being based on stock index.
What is the Company's dividend payment policy?
The Company has adopted a progressive dividend policy. This means that the dividend per share to be paid will not be less than the previous year. In this connection, the Company will also take into consideration its performance. In this connection, the Company’s dividend payments per share have been increasing over the year. As for 2020, the Board of Directors passed a resolution proposing that the meeting of shareholders approve the payment of a dividend of 3.00 baht per share for the Company’s 2020 performance. This consisted of the interim dividend payment of 1.20 baht per share which was approved by the Board of Directors and was paid on 27 August 2020, and the remaining dividend payment of 1.80 baht per share to be paid by TCAP. The total payment would amount to 3.00 baht per share, which was equal to the previous year’s dividend (excluding the special dividend).
What is the Company's plan for growth in 2021?
The Company still has cash remaining from the business restructuring and the merger between TMB Bank and Thanachart Bank, in which the Company has previously informed that such cash balance would be used for the best interest of shareholders. Due to the COVID-19 situation, investment prospects are uncertain and as a result, the Board of Directors has adopted a policy of maintaining a high level of liquidity. The objective is to strengthen the financial position of the Company’s subsidiaries. Currently, the Company has a new financial business plan, and it is in the process of proposing for the approval from the Board of Directors. The Company will update the details after getting the approval at the next meeting. As regards the investment plan, the Company is waiting for an appropriate opportunity. This includes the assessment of the situation and trends of theCOVID-19 outbreak, the effectiveness of the vaccine, and the government's economic stimulus policies. As for the non-performing asset management businesses, the Company is looking for suitable additional investment opportunities as well.
What is the loan provisioning policy of the Company?
There are two main subsidiary and associated companies that need to set loan loss provision i.e. Ratchthani Leasing Plc. (THANI) and TMB Bank Plc. (TMB). These two companies have set loan loss provisions in accordance with the accounting standards-TFRS9.
What is the Company’s dividend policy in 2020?
The Company has adopted the progressive dividend policy. This means that the dividend per share will not be lower than that of the previous year and it also has to be taking into account the operating results. In the past, the dividends paid by the Company continued increasing. As regards this year, the Company still maintains the same policy. For the first half of the year, it already announced the payment of the interim dividend at the rate of 1.20 baht per share, which was equal to the rate paid last year for the interim dividend.
What is the Company’s remaining cash amount at present and what is its plan to use the remaining cash?
The Company’s remaining cash amounts to about 15,000 – 16,000 million baht. Due to the COVID-19 situation, investment prospects are uncertain. As a result, the Board of Directors has adopted a policy of maintaining a high level of liquidity. The objective is to strengthen the financial position of the Company’s subsidiaries. As regards the investment plan, the Company is waiting for an appropriate opportunity. It is expected that the full impacts of the COVID-19 outbreak will unfold in the third and fourth quarters of this year. In relation to non-performing asset management, it is expected that commercial banks will gradually dispose of their non-performing assets towards the latter part of the year. This will be also the time for the Company to start buying them for the purpose of asset management.
What is the outlook for the operating results of Thanachart Insurance Public Company Limited and Ratchthani Leasing Public Company Limited (THANI) as well as the NPL situation in the second half of the year?
Overall, the insurance business is in good shape despite declining new-vehicle sales. On the other hand, demand for used cars improves. As a result, insurance premiums of used cars increase. Meanwhile, renewals of car insurance through Telesales channel are encouraging. Noteworthy is the strong growth of car insurance through non-bank channels.
THANI has been impacted by the COVID-19 pandemic to some extent. However, the number of customers who asked for a freeze on repayments was not large as few THANI customers are involved in tourism-related businesses. In fact, most customers are in the trucking business. As regards the NPL status, the situation is controllable since THANI has taken precautionary and stringent measures for business expansion.
What is the Company’s dividend policy in 2020?
The Company has adopted the progressive dividend policy. This means that the dividend per share will not be lower than that of the previous year. In the past, the dividends paid by the Company continued increasing. As regards this year, the Company still maintains the same policy. For the first half of the year, it already announced the payment of the interim dividend at the rate of 1.20 baht per share, which was equal to the rate paid last year for the interim dividend.
In view of the Company’s notification that currently it has about 15 billion baht of excess cash, what is the Company’s plan for using the excess cash? Will the Company make special dividend payments or purchase additional treasury shares?
The Company has already repurchased treasury shares which account for 10 percent of the paid-up capital in line with the resolution adopted by the Board of Directors. As a result, the Company cannot buy additional treasury shares at present. It has to wait until the end of the one-year period. Only after the completion of the share buyback program, the Board of Directors could adopt another resolution to repurchase treasury shares. As regards the special dividend payments, it is necessary for the Board of Directors to consider the payments. In relation to the investment plan, the Management has to spend more time on studying the plan. As Covid-19 outbreak causes uncertainty on investment, it is important that the Management has to consider the plan cautiously.
With reference to the Company’s notification that it is the Company’s policy to buy additional shares of TMB until its ownership reaches 22.9 percent in line with the approval given by the Bank of Thailand, what action has already been taken by the Company?
Currently (as at 29 May 2020), the Company has not yet bought any additional shares of TMB. Its equity stake in TMB remains at 20.12 percent.
What are the Company’s goals in relation to the purchases of non-performing loans (NPLs) and non-performing assets (NPAs) for the purpose of asset management over the next one to two years?
Previously, the Company planned to gradually buy unsecured debts. As their outstanding balances were relatively not too high, the purchases did not require a lot of money. However, in view of the current Covid-19 situation, the Management has to act cautiously. The plan to make the purchases may have to be postponed for now.
What is the Company's dividend policy in 2020?
The Company still maintains its progressive dividend policy. This means that the dividend per share for this year will not be lower than last year. In this connection, in the past year, the Company paid 3.00 baht per share from the Company’s business operations. As various businesses are affected by the Covid-19 outbreak, the impacts will have to be assessed again. However, the Board of Directors attaches great importance to and looks after the benefits of shareholders, to the best of its ability.
Will the merger plan be implemented in line with the original schedule and how?
According to the law, the implementation of the merger has to be completed in 2021. In this connection, a committee responsible for overseeing the merger has been established. The committee which consists of team members from both banks presents its report on a monthly basis. They work closely together to ensure that the merger will be completed within 2021. The progress on the merger has been in line with the originally established plan and it is expected that the merger will be completed in the middle of 2021.
What will be the Company’s expected profits for the second quarter and the second half of 2020?
The performance of Thanachart Securities (TNS) is still expected to be in line with the established targets. On the other hand, the performance of Thanachart Insurance (TNI) will be slightly lower than the established target, mainly due to the decrease in insurance premiums as a result of the decline in car sales. In this connection, TNI has introduced new products, aiming at meeting customer needs and mitigating the impacts of the Covid-19 outbreak. As regards the performance of Ratchthani Leasing (THANI), the company has been affected by the decline in demand of automobile hire purchases and THANI has been more cautious about approving loans. As a result, the loan growth is below the established target. On the other hand, the company manages to keep the impacts at a manageable level.
As TCAP is a major shareholder of THANI and THANI has announced a plan to increase capital, analysts asked the following questions:
OBJECTIVES OF THANI’S CAPITAL INCREASE
- To strengthen the capital fund and manage the financial structure to be in the appropriate proportion
- To strengthen the confidence of shareholders, investors, debtors, and all stakeholders on the company’s strong financial status in the long-term
After THANI’s capital increase, its debt-to-equity (D/E) ratio will decrease to less than 4 times from the level of 5 times. As a result, the company will be able to manage its finances more efficiently.
WILL TCAP SUBSCRIBE TO THE NEWLY ISSUED SHARES OF THANI IN AN AMOUNT EXCEEDING ITS RIGHTS ISSUE IN CASE NO OTHER SHAREHOLDERS SUBSCRIBE TO THE SHARES?
TCAP is able to invest in THANI until it reaches 65 percent, a level at which TCAP is not required to make a tender offer. However, in case other shareholders do not subscribe to the shares and TCAP’s equity stake as a result of additional subscription increases to the level which requires it to make a tender offer, the Management will have to conduct more detailed study. TCAP believes that this round of raising capital is beneficial to all shareholders of THANI.
Currently, TCAP is the holding company which invests in financial businesses and non-performing asset management businesses and TCAP still has some remaining cash. Would like to know how the Company will use the remaining cash?
The Company has a policy to expand the business into non-performing asset management businesses that purchase retail unsecured NPLs. The Company will gradually purchase as management deem appropriate. Also, it will need to invest in the system to manage retail NPLs clients because the system that it is currently using is suitable only for handling corporate and SME clients. The remaining cash from purchasing unsecured NPLs will be considered to invest in deals that will generate suitable returns for the shareholders.
There were 2 measures of cash management that have already been implemented for the shareholders. The first one was the special interim dividend payment at the rate of 4 baht per share, or 4,583 million baht. The second one was share repurchase of not more than 6,000 million baht.
TCAP invested in TMB by purchasing newly issued shares of TMB at the price of 1.1 times of the BVPS and the current TMB share price has dropped significantly. Does TCAP need to mark to market and recognize loss in the profit and loss statements?
TCAP currently holds more than 20% of the total shares of TMB; therefore, the investment in TMB is an investment in associated company. As a result, it does not need to mark to market and TCAP will recognize TMB’s profit proportionately to its shareholding as the share of profits from investments accounted for under equity method.
Would like to know what is the dividend policy in the future?
We will maintain our progressive dividend payment policy, which means the amount of dividends per share to be paid this year will not be less than the amount paid last year, taking into consideration the ability to pay dividend in the future.
Is there any overlap in HP businesses between Merged Bank and THANI?
Merged Bank's hire purchase products are for new cars, used cars, Cash Your Car (using cars as collaterals), and Cash Your Book (using registration book as collateral). Meanwhile, THANI’s main products are hire purchase loans for trucks, motorcycles (big bikes) and sports cars (super cars). So, there is no overlap or conflict.
Why did the non-performing loans increase in the third quarter of 2019?
The increase in the non-performing loans was mainly due to the fact that a group of large corporate loans which were part of the rehabilitation plans was faced with certain constraints preventing them from implementing the plans. As a result, they were downgraded to non-performing loans. However, as TBANK already set aside adequate reserves to fully cover them, it was not necessary for the Bank to allocate additional reserves. Meanwhile, the borrowers are in the process of adjusting their rehabilitation plans. If the plans are approved, this group of borrowers would be reclassified as normal loans. And the level of the non-performing loans would be reduced in the future.
What is the automobile industry outlook for the fourth quarter of 2019?
Typically, auto sales performance will be improved in the fourth quarter, mainly due to the Bangkok International Motor Expo which is held annually. The auto sales growth is expected to be higher than the third quarter. However, it will be only slightly higher than the growth in the fourth quarter of the previous year, which is quite high. As regards the used cars, their sales are expected to decline. The demand for used cars falls as Thailand’s economy slows down. In addition, borrowers’ ability to repay loans is also reduced. As a result, car repossessions increase. Moreover, used car tents participate less in used car auctions. As a result, auto hire purchase operators suffer a higher level of losses due to the increase in the number of cars repossessed. In dealing with the problems, TBANK has classified its customer groups by placing a strong emphasis on those groups with high potential. As a result, the Bank is still able to manage the quality of its auto hire purchase loans effectively. Also noteworthy is the fact that the growth of its hire purchase loans remains satisfactorily. On the other hand, as regards the management of debt collections and follow-ups, the Bank manages the debt collections and follow-ups in a systematic and effective manner, thanks to the Bank’s careful study of the information available in all related areas. As well, it regularly holds discussions with all the parties concerned in order to keep updated on the problems and jointly work towards solutions.
Has TBANK set aside an adequate loan-loss provision in line with International Financial Reporting Standard 9 (IFRS 9) and to what extent? What will be the provisioning policy after TMB Bank purchases the shares of TBANK?
Currently, the provision set aside by the Bank is higher than the model of IFRS 9. The Bank’s excess provision will serve as a part of management overlays which could not be reversed. In addition, the Bank of Thailand has established a rule on the provision floor which requires all banks to set aside the provision equal to no less than 1 percent of performing loans and investments over the next three years. It requires that the provision must be no less than 0.33 percent in the first year, no less than 0.66 percent in the second year and no less than 1 percent in the third year, respectively. At present, the provision set aside by TBANK is higher than the Bank of Thailand’s minimum requirements. As regards the future policy, please be informed that, from now until the business transfer date (about the middle of 2021), TBANK and TMB Bank will separately pursue the provisioning policy based on their own models. Meanwhile, the two banks will adjust their policies step by step until the date when the two banks are merged. By that time, there will be only one provisioning policy.
The following are questions about TCAP in the future after the business restructuring and the trading of the shares of TBANK as well as those of TMB Bank are successfully completed.
- Will TCAP be required to maintain the minimum capital adequacy ratio and to what extent?
In the future, TCAP will not be required to maintain the minimum capital adequacy ratio since TCAP will not be regulated by the Bank of Thailand. As a result, the ratio which TCAP will have to primarily take into consideration is the debt-to-equity (D/E) ratio.
- What will TCAP’s debt-to-equity (D/E) ratio be?
Currently, the D/E ratio based on TCAP’s separate financial statements is about 0.5 times. However, after the business restructuring and the trading of the shares of TBANK and those of TMB Bank are successfully completed, the D/E ratio will be reduced to a very low level--approximately 0.2 times. Looking forward, the ratio is expected to stay at this level. However, if there are appropriate investment projects which will be of benefit to shareholders, the management may consider issuing additional debentures in order to get funds for the investments.
- What will be the future scope of business operations?
In the future, TCAP will focus on the core assets in which it invests. In this connection, the main investment is the equity stake in TMB Bank (or the merged bank, afterwards) which holds the shares of TBANK in order to achieve synergy as expected. On the other hand, TCAP will also have to focus on Thanachart Insurance, Thanachart Securities and management of non-performing assets. According to the information disclosed earlier to the Stock Exchange of Thailand, after the business restructuring and the trading of the shares of TBANK as well as those of TMB Bank are successfully completed, TCAP will have a net cash balance of about 10,000 million baht. In this connection, the Board of Directors had adopted resolutions on the guidelines for managing the liquidity. Announcements will be made about the share buyback program of no more than 5,000 million baht as well as the special dividend payment at the rate of 4.00 baht per share. However, TCAP will still have cash inflows not only from running the normal business operations but also from disposal of investments other than the main investment. The stream of the cash inflows worth about 8,000- 10,000 million baht in total will be gradually received in the next 1-2 years. As for the guidelines for managing the cash inflows, the management will place emphasis on investing in the businesses on which TCAP has expertise and those which have strong growth potential. In this connection, TCAP is in the process of conducting feasibility studies.
- Which sector will the shares of TCAP be traded under?
The shares of TCAP will continue to be traded under the Bank Sector since a major part of TCAP’s income is still from banking business in which TCAP will own higher than 20% equity stake.
Would like to update on the progress of the hire purchase credit control measures of the Bank of Thailand (BOT). What would be the minimum down payment or the debt service ratio (DSR)? How has the Bank been preparing?
The Bank believes that the expected BOT’s policy measures to control car loans are good for the industry. These measures can strengthen the banking system. The Bank expects these policy measures that will come out are measures to monitor the credit approval of each bank to have responsible lending in order to achieve the sustainable business by commercial banks. For risk management, the Bank has taken strict measures for credit approval process based on the credit scoring of the customers. If the customer has a low credit rating, the customer will get a low LTV and vice versa. However, the LTV of the Bank on average is approximately 80-90 percent. For considering DSR, it would be as the same manner. If the customer has a high credit scoring, the DSR will be high as well.
What were the causes of having relatively low credit cost in the second quarter of 2019 and what would be the prediction of credit cost for the second half of 2019?
The Bank has been evaluating and reviewing the provision provided for all the Bank’s customers. It was found that there were certain groups of customers that the Bank was confident that they had high debt repayment potential. Therefore, the Bank reversed some of the provision provided for these groups of customers. As a result, in the second quarter of 2019, the Bank's credit cost was lower than the target. For the second half of 2019, the Bank's credit cost should be approximately 0.6 - 0.7 percent which is in line with the target. As the Thai economy in the second half of 2019 is fragile while the Bank focuses on retail lending which is sensitive to economic conditions, the Bank’s reserve might be slightly higher than the current level.
In the first quarter of 2019, the cost of fund increased and what is the trend of the cost of fund in this year?
The Bank views that the market interest rate in this year will be in a steady trend. The reason for the increased in cost of fund of the Bank in the first quarter this year was due to the increased interest rate by the Monetary Policy Committee of the Bank of Thailand (MPC) at the end of 2018. We expect that the policy interest rate will be stable for this year and the Bank will be able to manage the cost of fund to be at the same level as the previous quarter.
What will be the credit cost trend whether it will be better than the target?
The Bank's credit cost in the first quarter was at 0.47 percent, which is lower than the target of this year (0.60-0.70 percent). It was due to the fact that one of the Bank’s subsidiaries had reserve adjustment which resulted in a low level of credit cost. If taking out such extra item, the Bank’s credit cost would have been close to the target. In 2019, it is expected that the Bank would be able to maintain its credit cost level close to the target.
What is the current situation of car loans with cash back and top-up incentives?
Some of the lenders are lending higher than 100 percent of LTV to gain more customers. This is not only in hire purchase loans but also in other type of loans. The BOT has taken control measures in housing loans by setting new policies which was effective on 1 April 2019. For the hire purchase business, the Bank has discussed with the BOT already, but it is still uncertain that the BOT will issue a new regulation to control the hire purchase loans. Meanwhile, the Bank has had tightened credit approval policies by taking into account the credit rating of each customer. If the customer has a low credit rating, the customer will get a low LTV and vice versa. However, the LTV of the Bank on average is approximately 80-90 percent.
Since the Bank has had quite an impressive growth for the hire-purchase loan business, what is the growth outlook in 2019?
We forecasted that new automobile sales will grow by 2-3% in this year. With regards to strategy execution on new automobile hire-purchase loans, the focus will be placed on increasing the market share, given our sales team’s coverage all over the country. For used automobile loans, the “Focus and Select” approach will be employed, by screening used car dealers with good track records of debts quality and those that provide guarantee for the quality of automobiles. Meanwhile, the “Cash Your Car: CYC loans” will be marketed continuously and it is expected that this product can generate consistent growth. Another loan product is “Cash Your Book: CYB;” a new loan program launched, back in the middle of 2018. It has been designed to satisfy diverse customers’ needs as the first priority. All of these have lead to the Bank’s hire-purchase loans being able to meet the needs of each customer group very well.
Could you elaborate on the credit risk for automobile hire-purchase loans?
The Bank’s hire-purchase loans for automobiles bear quite a low credit risk level. The Bank places emphasis on customers’ scoring and the scoring model has regularly been improved, including effective loan approval process, close monitoring of debt collection and all of that leading to low level of NPL for hire-purchase loans.
This year the Bank will be entitled to the normal tax rate (20%) for the whole year, which can potentially going to impact the Bank’s operating performance, what are the protocols to induce earning growth, for instance, reducing credit cost down from the target level of 0.6-0.7%?
Regarding on this matter, we have always been prepared all along. If considering from the operating performance in the previous year, the earning before tax has increased, reflecting strength in operating the business and growth of our core business. This year, we anticipated that the loan growth will be the key contributor for growth in terms of interest and non-interest income. The earning before tax is then likely to be higher than that of 2018, while the credit cost should be around 0.6-0.7% as guided.
As the coverage ratio has started to decrease, meanwhile the Reserve to Required Reserve has also decreased, what would be your comments on this matter?
Currently, the allocation of reserve employs the model that takes into account the potential loss in the future (Expected Credit Loss), while the allocation of reserve according to IFRS9, the Bank anticipates that adequate amount of reserve has been allocated, thus the current coverage ratio is considered sufficient.
In recent, TBANK has been growing well in Hire Purchase but the interest rate tends to be increased. How does TBANK manage the interest rate risk?
The interest rate for Hire Purchase has been recently increasing while TBANK focuses more on the increase in Used Car and Cash Your Car Hire Purchase. For Deposits, TBANK has been raising long-term deposits for duration mismatch management between Hire Purchase that has fixed interest rate and Deposits with long-term. Also, we have had some of Interest Rate Swap since last year in order to reduce the risk of interest rate that tends to be higher.
What is the guideline for the growth of CASA?
For the growth of CASA, first, TBANK tries to grow CASA by inviting customers who have loans with the bank to open saving accounts and pay monthly installment by Direct Debit Service. By doing in the way, customers will have more convenience for making payments. The other part of growth is from customers who do not have loans with the bank. The bank encourages these customers to use our Mobile Banking and open Ultra Savings accounts which provide higher interest rate than normal Saving Accounts as incentives for customers. As a result, customers will have a chance to use our service and will have good experiences with our services which make customers use our products and services more in the future.
How does TBANK manage its operating expenses and what is the trend of these expenses?
In past Q3/2018, the bank managed operating expenses well since the expenses were decreased. However, the bank focuses on monitoring Cost to Income Ratio that we not only control the expenses but also focus on increasing in revenue in order to lower the Cost to Income Ratio to be on par with the industry average. In the past, we had the policy of Zero Growth Operating Expenses which we always did well. At the same time, the number of our branches has been reducing. At the end, the bank has to put strong emphasis on increasing the revenue by utilizing our resources we have invested to create business growth. Importantly, the digital banking system which the bank invested is different from those of competitors. It is because our major customers are Hire Purchase customers, we have put strong effort in developing our digital system to meet our major customer’s demand. For Q4/2018 operating expenses, it tends be higher than that in Q3/2018 since in Q4/2018, it is time that the expenses are needed for supporting businesses.
In Q3/2018, NPLs increased but the coverage ratio slightly dropped while reserve to required reserve according to the Bank of Thailand was still high. What is the guideline for management of those ratios
The reason why NPLs increased but coverage ratio slightly dropped is because those additional NPLs increased in Q3/2018 was from secured loans. As a result, the bank did not need to have high reverse. For the management of coverage ratio, the bank mainly compares with the industry average. Also, for the reserve amount, the bank uses the Expected Credit Loss Model in consideration of losses that may arise in the future to see if the bank has the enough amount of reserve. With our forecast, the bank has enough amount of reverse.
What is the tendency of the Bank’s loan growth in the second half of the year?
We have had an impressive growth momentum for the hire purchase loans, with 5.44% growth in the first half of the year. It is expected that we will continuously be generating more growth through the end of the year, while mortgage loans and SME loans have had moderate growth and we expect that we can meet the annual growth target. However, corporate loans might not grow as planned because we are quite cautious of the risk factors, coupled with the fact that many large companies have shifted their fund raising vehicle to the issuance of debt securities, given their rather low interest rates. Since interest rates charged for large corporates are quite low, we have allocated a portion of corporate loans to issue commercial papers and divest them to generate fees income. Overall, we expect that the Bank’s loan is likely to grow by 5% as targeted for the whole year.
What is the Bank’s policy in managing interest rates risks? Given the fact that the hire purchase loans have made considerable growth and that the Bank exercises fixed interest rates, coupled with the market tendency for increase in the interest rates.
The Bank’s interest rates for hire purchase loans are mainly based on the customers’ risk profiles. Recently, we have already adjusted the special interest rate, which are quite low, together with the restructuring of the hire purchase loan portfolio, focusing more on used car loans, cash your car (CYC) loans, and cash your book (CYB) loans. These loans carry higher interest rates than that of new car loans, causing the overall interest rates for the hire purchase loans to increase, together with the interest rate swap in the previous year and the increase in long-term saving deposits. These are all the measures to reduce the interest rate risks in times when the interest rate is on the rise.
What is the target of the Bank’s coverage ratio? Since the current percentage is quite high and more than 50% of the loans are hire purchase loans with automobiles as collaterals.
The Bank has the policy in place to maintain the coverage ratio at the similar level of the industry. The current coverage ratio is 132.34%, while the collective approach is being exercised to allocate the hire purchase reserve, which minimizes the chance of lower loan quality in the future. Moreover, the hire purchase loans are collateralized, whereby the sufficient coverage ratio is probably lower than the current level. However, the coverage ratio that is higher than the sufficient threshold can be effective in preventing risks and volatility in the Bank’s operations that might arise in the future.
Given the tax shield that has just ended, will the Bank pay corporate income tax at 20% in the second half of this year?
The terminated tax privilege will have led to the Bank’s tax payment obligation of 20% in the second half of the year. However, if considering the Bank’s operating performance, it can be seen that the Bank has continuously been generating higher profit before tax, reflecting the Bank’s strength in business operation and growth of its core business.
What is the impact of Thanachart Capital (TCAP)’s Tier I from the announcement of the share repurchase program?
The share repurchase campaign that has just been announced has the financial amount of 1,000 million Baht, causing the Tier I to decrease slightly. Currently, TCAP’s Tier I in the consolidated financial statement is 12.61%, which is considered quite high for the parent company of a financial institution. Therefore, the management is of the view that the share repurchase campaign is not going to have any negative impact on the financial position, but it should have a positive impact on the share price.
What is the Bank’s plan to grow its non-interest income?
The Bank is still focusing on generating its non-interest income growth, especially from increasing fees and service income in all business groups on a continuous basis; fund management, securities and insurance businesses.
What is the Bank’s projection of credit cost?
The Bank has always been closely monitoring and managing asset quality, focusing on effectively analyzing borrowers’ quality and minimizing risks of overdue payment that may occur in the future, potentially leading to the decrease in credit cost.
What is the Bank’s plan regarding loan growth?
The Bank is focusing more on retail loans as the Bank is of the view that this market has high growth potential and competitive advantage, whereby hire purchase loans, housing loans and small SME loans will be key drivers for the loan growth. Also, the Bank is looking to continuously expand the hire purchase loans for new cars, while increasing proportion of used car loans by forming partnerships with used car dealers. In this regard, dealers will be clearly segmented in order to effectively analyze customers’ requirements. The Bank initiated more marketing activities for ‘Cash Your Car’ loans, and incorporated a new distribution channel via telesales. Besides, a new product; ‘Cash Your Book’ loans was launched in April, where car registration license will be pawned. It is expected that the Bank can generate satisfied interest revenue from higher risks involved. Thus, the returns from hire purchase loans are likely to be rather high, coupled with effective asset quality management and in-depth market and customer analyses, enabling the Bank to increase its market share. In this regard, it has been forecasted that the proportion of retail loans will increase to 74-75% over the next 3-5 years from 71-72% at the moment, while for corporate loans, the Bank is focusing on increasing its fees income from the investment banking business.
What is the Bank’s plan to increase its deposits?
The Bank emphasizes on clearly segmenting our customers in order to develop and provide financial products and services that are diverse and can satisfy customers’ requirements most effectively. The Bank also increases advertising exposure and marketing activities to approach each group of customers more comprehensively. Furthermore, the direction is to develop digital banking platform for customers to do basic financial transactions for more convenience to promote financial transactions with the Bank, which will lead to growth in deposits and more cross-selling opportunities as well.
What is the outlook for NPL in the second quarter?
The NPL in the second quarter is likely to increase slightly, which is quite seasonal and in line with the loan growth. In this regard, it is believed that the NPL ratio in 2018 will be somehow in the same range as that of 2017, whereby the Bank places great emphasis on closely managing borrowers and reviewing debt restructuring plan for some borrowers, resulting in our debt collection activities being in control.
What is the Bank’s projection regarding coverage ratio?
The Bank projected that the current coverage ratio is sufficient for the business operations and can handle risks that may incur in the future.
What is the Bank’s direction for branch management?
The Bank has prepared for branch management protocols over the past 3 years, with consideration of the adequacy of the number of branches in each area. The Bank wants to ensure that the number of branches is enough for customers and that access is convenient. In this regard, the number of branches at the moment is suitable. Moreover, the Bank is also focusing on improving our human resources to be more knowledgeable to enhance the level of service provision and give advices to customers more effectively. Speaking of which, branch management is being closely monitored as customer behaviors in different branches are not the same and are changing very rapidly these days.
How does the Bank plan to grow its loan portfolio in 2018?
The Bank will focus on increasing the proportion of retail loans, particularly in the expansion of hire purchase loans for new car, used car and Cash Your Car as well as small SME loans in which the Bank expects good yield and opportunities to be the Main Bank for customers that could lead to the growth in CASA. In the past year, retail loans expanded well from the development of the scoring system to be more efficient and the credit approval process to be faster and more convenient. In terms of corporate loans, the Bank will focus on Mid Cap companies with high potential to grow. For the big corporate, the Bank will focus on increasing activities to customers in the capital market to maintain good relationship.
How does the Bank expect the non-interest income ratio in 2018?
The bank expects the net operating income to grow from the increasing in net interest income driven by the growth of loans and the better interest spread management. Meanwhile, the non-interest income tends to grow slightly in 2018 as the base line of 2017 is relatively high due to that Thanachart Group had an extraordinary item in gains on investments from selling shares of MBK in Q4/2017. As a result, the non-interest income ratio will be close to last year at 30-31%
What are the reasons for the decreasing in operating expenses for Q4/2017, comparing to the previous quarter?
The Bank actually had the plan to restructure its organization in 2017, but due to the efficient management, the expenses on reorganization were lower than the budget. Moreover, the reorganization was completed in the first three quarters of the year so that the operating expenses decreased in Q4/2017.
How much the remaining tax benefits does the bank have?
The Bank had the remaining tax benefits of 948 million baht at the end of 2017 that can be utilized until Q2/2018 which is also in line with the plan.
What is the Bank's asset quality management plan?
The Bank continuously implements and closely monitors its risk management strategies in each customer group as well as considers risks that may occur in the future. As a result, the analysis on quality of customer is efficient, and the risk of default is minimized.
How does the bank manage its branches?
Currently, the Bank is in the process of studying and analyzing the numbers and locations of branches to be appropriate and adequate for the numbers and needs of customers in all groups. This is to ensure that customers can easily access to the bank with convenience and satisfaction.
How does the bank plan to operate its digital banking?
The Bank has a plan to operate its digital banking by considering the value of moving financial transactions through the bank's counters to the digital system. The bank will focus on small financial transactions of deposit, withdrawal and transfer which are the basic financial transactions that can be done digitally. As a result, the Bank will have lower costs as well as saving on time consuming for both staffs and customers. However, the bank will continue to focus on developing technologies with security and stability in order to build trust and confidence of customers.
What is the Bank’s plan for the growth of hire purchase loans?
The Bank expects that hire purchase loans is still in the momentum of growth; for new car, used car and Cash Your Car loans. In this regard, the growth of new car loans will be further supported by the sales promotion and the introduction of new models from several car manufacturers. Meanwhile, loans for used car will be in focus more on some particular types of cars, geographical areas or dealers that have strong potential, as well as more extensive utilization of the Bank’s Blue Book. Lastly, the Bank will exercise more marketing activities for Cash Your Car loans in order to meet the demand which is still prevalent.
What is the main reason for growth of the Bank’s insurance income in this quarter?
Insurance income growth has been continuing from the previous quarter, mainly due to effective cost management, claims management and the introduction of products that suit the needs of consumers, as well as the expansion of other channels to have a more extensive coverage in the market, and the introduction of digital product and service such as Thanachart Drive DD Application, enabling the Bank to enhance competitive edge. Higher sales of automobiles are also another factor for higher growth of the insurance income.
When does the Bank expect that the existing tax benefits will be used up?
At the end of 3Q17, the Bank had the remaining tax benefits amounted to 1,521 million baht, and it is expected that it will be used up in the second quarter of 2018, according to the Bank’s business plan.
What is the Bank’s plan for branch management?
The Bank has always been paying close attention to branch management all along in order to ensure that the Bank can appropriately adapt itself to current situations in the best possible way. This can be achieved by profoundly understanding customers’ needs in using services provided in branches in order to study the possibility of designing the branch office to meet the needs and create maximum satisfaction for customers.
Is there any plan for the Company to revise the dividend payment policy?
The Company is still paying dividend in a progressive manner, whereby the interim dividend payment this year was at the rate of 0.90 baht per share, which increased from the same period last year of 0.80 baht per share. Therefore, the payment rate per share in 2017 will not be lower than 2.10 baht, as opposed to that of 2016 when the dividend payment was at the rate of 2.00 baht per share.
What is the Bank’s plan in accommodating the change in International Financial Reporting Standard No.9 - Financial Instruments (IFRS 9)?
From the Bank’s primary study in considering the impact of IFRS 9, the Bank has an adequate amount of reserve to handle the IFRS 9 reserve allocation requirement. Furthermore, currently the Bank has developed the system to accommodate the IFRS 9 criteria which is expected to be completed and ready for use, in order to report to the Bank of Thailand as scheduled.
What is the Bank’s view on the outlook of non-performing loans?
The Bank is of the view that non-performing loans amount will increase slightly in pursuit of the loan growth in the near future. However, the Bank is confident that the ratio of non-performing loan to the total loans will continuously remain low. In this regard, the Bank has ensured effective procedures in managing non-performing loans, by taking a prudent approach in credit approval policy. Furthermore, the Bank has put in place a clear customer segmentation strategy in order to consider potential risks for each customer group for enabling effective analysis of customer profiles and minimizing chances of non-performing loans as much as possible.
What is the Bank’s view on interest spread?
It has been projected that interest spread will improve in the second half of the year, from a more proactive strategy in becoming the Main Bank for customers, by way of launching savings products that cater to customers’ needs, encouraging more customers to open bank accounts and make transactions with the Bank. This will potentially increase the CASA savings accounts. Moreover, there is a plan to redeem tier 2 capital subordinated debentures in the latter half of this year. Therefore, the Bank speculates that interest spread is likely to increase from the reduction of the Bank’s cost of fund.
What is the Bank’s plan for loans growth?
The Bank is still actively encouraging growth of all loan categories. The Bank is expected that hire purchase loans will continue to grow in all sectors including new car, used car, and Cash Your Car loans. In this regard, for new car loans, the Bank has formed alliances with several car manufacturers such as Chevrolet, Mazda, and Volvo to enable opportunities of increasing the customer base, while there is a tendency for improvement in used car loans as used car prices have resumed to normal level and demand for used cars increased. On the other hand, it is forecasted that Cash Your Car loans will still be growing strongly from the improvement and development of hire purchase system to be more effective. Meanwhile, corporate and SME loans are focused on particular industries that have potential to grow. Lastly, it has been projected that housing loans will continue to grow, following the development of distribution channels and the improvement of a more effective loan approval system.
What is the Bank’s view on operating expenses?
There is a tendency for the operating expenses to decrease as a result of working processes that are more efficient and aligned; the investment in IT system and the development of staff capabilities and knowledge in order to differentiate ourselves in customer service and secure maximum customer satisfaction. Therefore, the Bank places a strong emphasis on building effective work processes, which will lead to the reduction in operating expenses over the long run and result in a tendency to decrease cost to income ratio.
What is the Bank’s plan to grow its fee income?
The Bank is still focusing on generating its fee income growth including fees from non-life and life insurance businesses, trade finance transaction fees, and investment banking service fees, despite the fact that banking fees are likely to decline slightly following the government’s national e-payment policy.
How does the Bank plan to grow its hire purchase loans?
The Bank would continue focusing on growing its hire purchase loans in all sectors including new car, used car, and Cash Your Car loans. The Bank would emphasize on customer segmentation to deliver the appropriate services to maximize the needs of each group of customers together with the improvement in credit approval standard to be more efficient. For new car loans, the Bank has expanded its business into high priced cars by partnering with some automobile manufacturers in order to enlarge the customer base. Meanwhile, used car loans has improved from used car prices that start recovering to the normal level as well as the increasing in prices of some models . However, Cash Your Car loans has expanded well from the increasing of efficiency of sales channel through the Bank’s branch network.
How does the Bank plan to grow its small and medium enterprises (SME) loans?
The Bank would focus on expanding SME loans to the potential industries with high growth and stability. The growth of SME has still been limited due to Thai economy that slightly recovered and improved only in some areas and business segments.
How does the Bank plan to manage its provision?
In the first quarter of 2017, the Bank had its credit cost of 0.52% which was expected to be approximately 0.60%-0.70% for the year 2017 in accordance with the growth of loans. However, the special provision would not be further recorded in the future as its Coverage Ratio was quite high and strong at 156.82% as shown in the consolidated financial statements.
How does the Bank plan to invest in its digital banking service?
The Bank would continuously develop its IT infrastructure since last year, especially this year as well as next year. The major investment would be in technology to develop the technological systems and services to provide a full range of digital banking services. Such investment will cover 3 areas including 1) the development of digital services (accounting for 30% of investment) under the government’s National e-Payment Master Plan such as Prompt Pay and electronic tax, 2) the development of technological and security systems (accounting for 30% of investment) to meet the standards prescribed by the government, and 3) the development of branches and customer services (accounting for 40% of investment) to upgrade each branch and increase the electronic equipment for self-service system in accordance with the behavior of consumers who would be more likely to do transactions on their own. Nevertheless, the Bank would consider to utilize some of its tax benefits on the investment in technology in which it would not impact the profitability. Moreover, moving to a digital banking service would lead to the effectiveness of cost management in the future (Cost Efficiency).
What plan does the Bank have for the loan growth?
In 2016, the Bank expects that all loan types will grow better than last year. For corporate and SME loans, the Bank emphasizes on the sectors that have high potential of business growth while housing loans can grow better by increasing in the efficiency of sales channels and developing the staffs’ knowledge and expertise. For hire purchase loans, the Bank is foreseen to have a growth from both new cars and used cars as a result of the improvement in its credit approval standard to be more efficient.
What plan does the Bank have for the utilization of tax benefits?
At the end of 2015, the Bank had the remaining tax benefits of 2,934 million baht. The Bank tends to utilize the tax benefits on the investment in technology by improving the service channels that are more efficient in order to increase the Bank’s capacities of the competition in the digital era. Also, the Bank improves financial products that directly fulfill the needs of customers in order to increase the Bank’s profitability. However, the Bank is now reviewing the policy of tax benefits utilization.
What does the Bank expect for operating expenses trend?
The Bank continues to focus on the deduction in the operating expenses through human resource planning that is suitable for the number of transactions and also on the improvement of work process to be more efficient in order to control the operating expenses to be sustainably reasonable.
What were the reasons why the Bank continued to have lower NPL ratio in 2015?
As Thai economy has gradually recovered, the Bank cautiously managed NPL through the strict credit approval policy. Also, the Bank set the clear segmentation of borrowers, the close monitoring process of borrowers, and the debt restructure plan for some borrowers who might have financial problems. With all these factors, the Bank, therefore, decreased NPL ratio from 2.84% as of the end of the previous year to be 2.29%. In 2016, the Bank will mainly focus on the loan growth which may cause a slight increase in NPL according to the growth of loan. However, the Bank will maintain the level of NPL ratio to be as low as the previous year.
What plan does the Bank have for the management on the interest spreads?
As the interest rate currently tends to be increased, the Bank emphasizes on the increase in the proportion of current account and savings account to deposits (CASA ratio) and the increase in the duration of fixed deposits. As a result, cost of fund is expected to be stable and tends to be lower. Meanwhile, the Bank considers the loan yield to be suitable for being competitive in the industry.
What is the Bank’s plan to manage its cost of deposits?
The Bank aims to increase the proportion of Current Account and Saving Deposit Account (CASA) to total deposits by developing financial products and services that meet the needs of customers in every group in order to attract customers to use Thanachart Bank as their main bank for doing transactions. The Bank also increases the channels of doing transactions to be more convenient for customers to do transaction anytime and anywhere. As a result of this plan, at the end of the third quarter, the Bank has CASA ratio to total deposits at 46.76%, which is steadily increasing from the end of 2015 at 40.14%.
What is the Bank’s plan to deal with the change to the International Financial Reporting Standard Guidelines No. 9 (IFRS 9) about Financial Instruments?
The Bank is currently in the process of studying the impact that may occur. The Bank of Thailand will regulate IFRS 9 to be applied in 2019. The Bank began to prepare to be ready for the change of this guideline by steadily putting a special provision. As a result, at the end of the third quarter, coverage ratio of the Bank and its subsidiaries was at 136.31%, while coverage ratio of the Bank only was at 147.91%, which is expected to be sufficient, and no impact on the operation of the Bank.
What is the Bank’s plan to utilize its tax losses?
At the end of the third quarter, the Bank had tax losses totaling 3,343 million baht, which the Bank expects to use all its tax losses in the mid of 2018 depending on the Bank’s capability of generating profit. In 2016, the Bank considers to utilize half of tax losses as a special provision, and recognize the rest as a profit. However, in 2017, the Bank may have to revise the policy of using its tax losses again.
What is the Banks’ plan for provision?
At the end of the second quarter of 2016, coverage ratio of the Bank and its subsidiaries was at 129.01 percent, while coverage ratio of the Bank only was at 139.24 percent which is considered to be in a high level and sufficient. During the second half of 2016, the Bank has expected to utilize its tax losses as a special provision in order to prevent the risks that may arise in the future and to accommodate changes to the rules on an International Financial Reporting Standard 9 (IFRS 9), which is expected to be effective in 2018, and this will affect the calculation of provision for the commercial banks. However, according to the initial study, it is expected that the level of coverage ratio now is still sufficient, and there is no impact on the operation of the Bank in the long term.
What is the Bank’s plan for the loan growth and income growth?
The Bank still continues focusing on loan growth in all segments. For corporate loans and SME loans, the Bank has focused on expanding loans to some industries which still have some potential to grow in order to obtain good yields and to increase the proportion of cross-selling of more products. On the other hand, for hire purchase loans, the Bank has expanded its business in high-priced car segment. The Bank has developed a scoring system to be more efficient as well as partnering with some car manufacturers in order to increase the opportunities for business expansion. For housing loans, the Bank expects to grow by developing sales channels and developing the credit approval system to be more convenient. However, the Bank still continues to emphasize on controlling asset quality along with loan growth. Moreover, the Bank has focused on developing financial products and providing full banking services in response to meet the customers’ needs for using the Bank as their main bank for doing transactions (operating account), which will lead to expansion of customers and lower financial costs. This will affect the income of the Bank to be steadily grown over the long term.
What made the Bank’s net profit to be increased from the previous quarter and what is the Bank’s plan to increase the net profit in the future?
Since Thai economy has gradually recovered, this will have a negative impact to the Bank’s loans. However, the Bank's net profit has continually increased for 5 consecutive quarters due to an effective cost of fund management. As a result, the Bank was able to maintain its interest spread to be close to that of the previous quarter while the operating expenses could be controlled effectively. Moreover, the Bank has successfully managed non-performing loans in a systematic way which resulted in a decrease in credit cost from normal business operation leading to an increase in the net profit of the Bank. The Bank will continue to maintain the growth of net profit by focusing on cost of fund management, strengthening the asset quality, and controlling impairment loss of loan expenses.
What is the Bank’s plan to utilize the remaining tax losses?
The Bank is likely to keep continue using the tax losses utilization policy from last year. It is expected that some of its tax losses will be used as a special provision to prevent the risks that may arise in the future while the rest will be recognized as a profit.
What is the Bank’s expectation on Digital Banking?
The Bank sees that Digital Banking is important and necessary for business operation because nowadays, everything is involved with technology more and more. Also, the government has a policy to promote the development of technology and the technology has played a big role in our daily life. The Bank expects that fees income may be declined slightly in the short term. However, in the long term, with the highest effectiveness of customer services through its focus on meeting the customers’ needs to be able to bank wherever they want, and whenever they need. Consequently, this will increase the number of the Bank’s customers and the number of transactions between the customer and the Bank. Moreover, the Bank will be able to reduce costs in the long run which will strengthen the business operation in a sustainable manner.
What is the Bank’s plan for investment in Digital Banking?
According to an investment in Digital Banking, the Bank is expected that the operating expenses will increase. This can be in the form of Amortization. Digital Banking will help the Bank’s transactions to be smoother. Moreover, it can attract a new generation to use the services more which will result in an increase of CASA and will ultimately lead to an increase in fee income and an enhancement in customer services. In addition, due to an economic change, the Bank needs to adjust its operations to be in line with the market condition by consolidating branches nearby together. The Bank will start implementing in central business district branches, resulting in a reduction of the Bank’s operating expenses in another way.
What is the amount of the Bank’s tax losses at the end of 2015 and what is the Bank’s plan to utilize tax losses in 2016?
The amount of the Bank’s tax losses at the end of the year 2015 was 25,326 million baht which equivalent to a tax shield of 5,065 million baht. In the year 2015, the Bank has utilized 2,216 million baht of its tax shield to put as a special provision. However, the Bank foresees that to strengthen the Bank’s financial position is the main key driver to conduct business amid the economic change. As a result, the Bank plans to utilize some of its tax shield as a special provision, and the rest as a profit to make investors be more confident on the Bank’s business operation in the long term.
What is TCAP’s plan for property foreclosed management?
The management of property foreclosed will be depending on the economic market condition. Furthermore, most of TCAP property foreclosed has high potential. As a result, property foreclosed management of TCAP will be most effective whenever the market opportunities come. The focus is given on adding the highest value of the assets for the shareholders.
What is the Bank’s plan for loan growth in 2016?
The Bank will continue focusing on growing loan in every sector. Hire purchase loan started to have a positive sign with a slightly recovery due to an improvement of the automotive market. Moreover, the Bank has improved and developed the hire purchase systems and measures to be more effective in supporting the future loan growth and the cross-sell opportunities. However, the Bank estimates that housing loan will increase by developing the effective sales channels system. In addition, the Bank will focus on growth of corporate and SME loans in some strong areas as well as industries. The Bank also plans to expand more in the areas related to government’s infrastructure investment. The Banks still continues to place strong emphasis on a tightening credit approval policy.
What is the Bank’s plan to boost its fee income?
The Bank emphasizes to grow continually in fee income. On retail banking side, the Bank has implemented the fundamental systems and platforms. All staffs are trained on how to use available tools in order to develop the Bank’s products and services to be suitable to each group of customers. This will encourage customers to make more transactions through the Bank’s channels. In addition, fee income from insurance and life assurance will continue to grow due to the expansion of sales channels. On corporate banking side, the Bank plans to increase fee income through investment banking services e.g. debenture underwriting or financial advisory and trade finance business. The focus is primarily given on medium-sized companies.
What is the Bank’s plan for loan growth in the fourth quarter of 2015 and next year?
As the economy in this year has not recovered and expressed the growth as expected, the Bank is expected to face a negative loan growth in 2015, although loans growth in the third quarter and the fourth quarter started to show a positive sign. Next year loan growth is expected to increase on a YoY basis driven by the growth in other loans, including corporate, SME, and housing loans. On the contrary, hire purchase is seen to carry a negative growth from 2015 into early 2016. At the moment, the bank is preparing its next year business plan and target indicators in various aspects.
What is the Bank’s view on the trend of NPL?
The Bank expects NPL ratio to decline as a result of its effective NPL management. Indeed, NPL ratio of the Bank and its subsidiaries has been decreasing from 4.53 percent in the third quarter last year to 3.42 percent in the third quarter this year. The Bank has several measures in its plan to reduce NPL including debt restructuring, debt selling, and writing-off. With the Bank’s NPL management and its prudent credit approval policy, trend of new NPL is going down. As a consequence, the Bank expects to achieve its target NPL ratio of less than 3 percent in the coming year.
What is the Bank’s plan for deposit growth?
The Bank places high value on deposit growth, focusing on launching products and services that attract customers to open bank accounts and utilize bank transactions. This is primarily to raise CASA, which will reduce the funding cost and also support the Bank to comply with the BOT’s Liquidity Coverage Ratio to be effective in the coming year.
How does the Bank plan to utilize tax losses, as the Bank has tax losses arising from the completeness of liquidation of SCIB Public Company Limited in the second quarter this year?
The liquidation of SCIB Public Company Limited, which was completed in 2Q15, resulted in the Bank’s tax losses from its investment in that subsidiary with the remaining amount of 27,723 million baht at the end of the third quarter of 2015. At the same time, the Bank foresees significant changes in relevant regulations that will impact banking operation in the future including 1. Adjustments in the calculation of credit risk-weighted assets which will change the determination of the risk weight of each asset class and 2. International Financial Reporting Standard 9: Financial Instruments (IFRS 9), which Federation of Accounting Professionals plans to adopt in Thailand in 2019 and will affect the calculation of commercial banks’ reserves. Therefore, the Bank plans to address the new capital calculation and the new accounting standard by incorporating some of its tax losses as special provision and by realizing the remaining tax losses as profit to strengthen the Bank’s capital. This will enhance the investors’ confidence in the Bank’s capability to operate business in a sustainable manner in the long run.
What is the Bank’s plan on loan growth in this year?
The Bank is determined in maintaining its leadership position in hire purchase loans. Meanwhile, the Bank aims to generate growth in other loans such as corporate and SME loans, specifically focusing on the selected industries and locations that have competitive advantages and business centers in order to facilitate flawless customer service.
What is the Bank’s plan on the development of Digital Banking?
A great emphasis has been placed on the development of Digital Banking, with a specific focus on the internationally-accepted safety and security standard adopted from Scotiabank. The Bank’s relevant staff members also attended a training session to groom expertise and potential. The Digital Banking will generate more CASA and fee income to the Bank in the future. The Bank expects that Mobile Banking system will go live and be ready for service at the end of third quarter in this year. Besides, the Bank’s affiliated companies have also developed a broad range of technical tools in order to enhance the quality of customer service in general.
What is the Bank’s plan on capital fund in this year?
The Bank is planning on redeeming perpetual subordinated hybrid bonds (Hybrid Tier 1) due to a phase out of old style Hybrid Tier 1 in accordance with Basel III regulation, and in replacement of those, issuing shares (Common Equity Tier 1), totaling approximately 5,000 million baht in the fourth quarter in this year. For Tier 2 capital, the Bank has issued Tier 2 capital subordinated instrument (Tier 2 – Write down), amounting 7,000 million baht in May 2015 in order to replace the two batches of Tier 2 capital subordinated debentures that cannot be counted as Tier 2 capital in accordance with Basel III regulation, altogether totaling 11,000 million baht. This, in turn, will potentially sustain the strength of the Bank’s funds.
What is the Bank’s expected Coverage Ratio in 2015?
The Bank is resolute to manage non-performing loans (NPLs) continuously from 2014, applying the measures to closely monitor its loans according to the risk of each customer, to restructure some of loans whose customers are affected by the economic slowdown, and to sell off some loans. Through these measures, the Bank expects that its NPL ratio will decline, resulting in higher coverage ratio of the Bank (under separate financial statements), which is set to be 100 percent and lower credit cost as a result of high quality asset management.
How does the Bank view its loan growth?
The Bank expects loan growth of 2-4 percent compare to the previous year. Hire purchase loans are expected to face negative growth, as monthly repayment may be still high and greater than new hire purchase lending, which is affected by the fierce competition and promotions from automobile manufacturers providing hire purchase business. Corporate and SME loans are expected to grow by 8-10 percent. Corporate loan growth is generated from a strong base, while SME loans growth (medium and large sized) is seen in some locations and some industries. Also, the Bank is intently and continuously supporting SME loans (small sized) through its extensive branch network.
What is the trend of the interest spread?
The Bank’s interest spread is expected to show a positive trend resulting from an appropriate cost of fund management. The Bank has adjusted its strategy by persuading customers to open and utilize more current and saving accounts. At the same time, the Bank expects that the Bank of Thailand will maintain the policy interest rate to further facilitate gradually recovering economy of Thailand. This benefits the funding cost of the Bank as well.
How does the Bank plan to grow fee income?
The Bank still put more focus on the growth of fee income, such as fees from ATM cards, corporate clients and financial advisory, and investment banking services.
How does the Bank manage its operating expenses?
The Bank is still determined to constantly reduce operating expenses as seen from an attempt to utilize technology systems in its work process to increase efficiency, and make the process more updated, reduce the complication of the procedures, and increase the speed of the services given to the customers.
How does Thanachart Group plan for the treasury stock project?
Thanachart Group has a strategy to efficiently manage liquidity and create appropriate rate of return for shareholders. Currently, the Company has generated some excess liquidity. In addition, the Company and Thanachart Bank also have adequate capital to support their business growth. Therefore, Thanachart Group agreed to repurchase the shares for liquidity management, leading to a better earnings per share and a higher shareholders’ benefits.
What is the trend of NPLs?
NPLs is in its downward trend as the Bank still focuses on effective NPL management amidst the gradually recovering economic condition. The Bank has an NPL management plan to clearly segregate each borrowers group, closely monitor the borrowers, and restructure the debts of some borrowers with problematic financial status as consequence of the recent economic slowdown, especially retail loans which were hit from shrinkage in private consumption and a surge in household debts in the past period. Nevertheless, the Bank expects that, if the economy shows a clear sign of recovery, and an execution of the Bank’s strategic plan, NPLs will reduce, resulting in a decrease NPL ratio consistent with the target.
What is the trend of the Bank’s loan loss provision in the future?
Loan loss provision is expected to decrease as a result of the tighten credit policy consistent with the economic condition and, so, minimize the chance of downward credit migration. Moreover, the Bank has been closely monitoring its loans through both debt collection and debt restructuring, resulting in the downward trend of the Bank’s loan loss provision.
How is the loan growth?
Loans are expected to be no growth in this year. The main reason is the still-negative growth in hire purchase loans because 1) the repayment of the existing hire purchase portfolio is quite big compared to the newly hire purchase loans, which has been dragged down by decelerated growth in automobile industry and the overall economy, 2) new competition is coming from automobile manufacturers who fiercely penetrate the market with continual promotions, and 3) the Bank’s credit policy has become stricter to match the current economic situation. However, the Bank expects that it will be able to partly compensate the overall loans growth with the growth in corporate loans and SME-S (small SME loans).
How is the plan to adjust deposit structure?
The trend of competition for deposit is quite moderate, which is consistent with the slowdown in loans. The market outlook also expects that the policy interest rate will remain at the same level for some time to continually support economic recovery. The Bank, therefore, focuses on presenting deposit products that correspond to the market demand and expanding CASA to support the customer’s transactions.
What is the condition of the Bank's Non Performing Loans?
An increasing in non-performing loans (NPLs) in the past period came mainly from used cars in hire purchase loans, as the price of used cars went down due to the effect of the First-Car Campaign. On the other hand, NPLs in corporates, small and medium sized enterprises (SMEs), and housing loans under the Bank(s credit policy were minimal. Nevertheless, under the tightened credit policy for hire purchase loans of Thanachart Group since the second half of the previous year, the Bank expects to have less growth in NPLs in the second half of this year. In addition, the Bank still maintains the target to continually reduce its non performing loans.
How is the Bank's loan loss provision in the second half of the year?
The loan loss provision in the second half of this year is expected to improve as the loss of selling repossessed vehicles showed positive sign. In the past period, the Bank seized more cars and speeded up the auction process. Furthermore, the Bank(s more rigorous credit policy, together with recovering economic condition, will lessen the possibility of downward credit migration. Consequently, NPLs will be reduced.
What is the loan growth outlook in the second half of the year?
Hire purchase loans is expected to contract consistent with the decelerated automotive sales. Loan growth will mainly be driven by corporates and SME loans. The demand for new credit approval and drawdown from corporate loans still remain. For SME loans, the Bank will focus on existing customers, most of which are in food and service businesses with the need for working capital or business expansion. Housing loans is expected to continually grow with the number of unit transfer in new real estate projects.
What is the situation of Bank deposits in the second half of the year?
The competition for deposit in the second half of this year will not be so intense, because the Bank of Thailand is expected to execute its policy to maintain a high level of liquidity in the market. In addition, government banks do not have the need for sizable funds. Nevertheless, the Bank still has a higher cost of deposits, compared to big commercial banks, whose CASA account for 50-60% of total deposits. Therefore, the Bank plans to decrease its cost of deposit by constantly increasing its CASA through the opening of new saving accounts.
How does the Bank plan to boost its fee income?
The Bank(s fee income is expected to continually improve, although fee income slightly dropped in the previous quarter following the decreasing number of tourists caused by Thailand(s political situation. The Bank aims to boost its fee incomes from card products, including ATM and credit card, and other fee-based products, including Letter of Credit (L/C), Trust Receipt (T/R) and Foreign Exchange (FX) transactions.
How does the Bank plan to reduce its operating expenses?
The Bank can effectively control its operating costs by utilizing technologies to reduce the complexity of its process and systemize its existing procedures in order to enhance the Bank(s operational efficiency and offer steady cost saving.
Would it be possible to achieve loan growth target of 6-7% in 2014 due to the possibility that the repayment of hire-purchase loans would be higher than the new hire-purchase loans?
In 2014, the Bank will focus on extending new credit to mid-sized corporates and small and medium sized enterprises in which the Bank already have potential target customers. Moreover, the Bank will expand customer base by focusing on business sectors with high growth potential as well as current customers with proven track records. For hire-purchase loans, the repayment is getting higher, therefore the growth rate may not be as high as previous years. In addition, the Bank expects higher growth rate on retail loans other than the hire-purchase . The Bank had implemented credit scoring system in order to expedite loan approval process for retail and small sized SME (SME S) while maintaining appropriate level of risk so as to achieve a target loan growth of 6-7 percent.
What is the Bank’s policy on Internet Banking, Cash Manage and One Account See Through?
Scotiabank had introduced Internet Banking by installing a new system to replace the older version. Scotiabank’s Internet Banking system offers higher security protection up to international standard so that our customers can transact online with greather confidence. The Bank is in the process of installing software which will enable online transaction for both retail bank customers and cash management for wholesale bank customers.
Regarding One Account See Through, the Bank provides CEM (Customer Experience Management) system which will assist our staff team to offer their service to customers more efficiently by gathering information on individual’s financial services so that the Bank can offer appropriate financial products and services in order to create greater customer’s satisfaction.
What was the major cause of credit cost of 0.73 percent in 2013 and what is the target of the Bank’s credit cost in 2014?
The credit cost of 0.73 percent of total credit in 2013 was mainly due to hire-purchase business. By having greater rigorous loan approval policy, the Bank expects credit cost to reduce to 0.60 percent in 2014 (including loss from selling repossessed vehicles) due to lower loan loss provision as a result of:
- In 2012, the Bank loans increased significantly led by hire-purchase loans which soared approximately 38.57 percent, resulting in higher non-performing loans and subsequently higher loan loss provision. However, hire purchase credit declined significantly in 2013, therefore the Bank expects NPLs will decline in 2014 and loan loss provision will also be reduced.
- In 2013, the Bank had put in place more rigorous loan approval policy while hire purchase loans declined in 2013 due to changing market environment. Therefore, it is expected that new NPLs formation in 2014 will decline in 2014, resulting in a lower loan loss provision.
In the overall used car market, what was the average amount of loss from selling repossessed vehicles in 2013 compared to 2012?
In 2013, the loss of selling repossessed vehicles increased from 2012 due to disequilibrium of demand and supply of used cars, which led to a lower selling price in 2013.
Does the Coverage Ratio set by Thanachart Group is at an adequate level?
Thanachart Group’s coverage ratio was 82.61 percent as of 31 December 2013, which was lower than the average level of the industry. Nevertheless, by considering the ratio of allowance for doubtful accounts to total loans as shown in consolidated financial statement, the ratio was at 3.81 percent, of which 2.22 percent was allowance for doubtful accounts of hire purchase and 5.77 percent was allowance for doubtful accounts of other loans. However, hire purchase loans accounted for 55.28 percent of total loan portfolio brought down the ratio of allowance for doubtful accounts to total loans to 3.81 percent, which was comparable to the industry average. Therefore, the Bank had set aside adequate loan loss provisions.