1. What are the company’s core businesses?
The core businesses of the company consist of credit card business (and its related products & services) and personal loan business. In the first half of 2019, each business’s total receivables are shown in the chart below.
2. What are the company’s major sources of income?
There are two types of main incomes: interest income and fee income from both businesses. The remainder derives from other businesses’ revenues, including Circle loan and Self-employed loan, details shown in the chart below.
3. Total card spending of KTC versus Industry
KTC credit card spending in the first half of 2019 continues to grow. The growth is contributed by the customer behavior analysis, which helps promote card spending. The credit card spending growths are displayed in the chart below.
4. What is the sources of funding?
The company borrowings comes from various sources, including commercial banks, securities companies, insurance companies, asset managements, as well as public offering of debentures.
Both short-term and long-term borrowings are the main components of the company’s financing tools, which are substantially composed of bill of exchange, promissory note, debentures, and long-term loan. In the first half of 2019, cost of fund accounted for 2.9%; meanwhile, the proportions of each borrowing component are stated in the chart below.
5. Debt obligation of the company
The company’s debt covenant has limited to Debt to Equity ratio lower than 10 times. In the first half of 2019, the ratio is only at 3.56 times.
6. Provisioning policy
The company provided the allowance for doubtful accounts for credit card, circle loan and personal loan receivables which have aging less than 90 days by using the loss rate net of recovery which the company believed that such loss rate reflects the current credit risk inherent in the portfolio. Moreover, the company adjusted the historical loss experience by the information on trend and economic conditions that might have an effect on the ability to repay the debt of the debtor groups including additional economic factors to cope with the potential risks from the future economic fluctuation and the company fully reserved for receivables which are defaulted for 90 days or more.
Although the company have not adopted TFRS9 accounting standard, the company already provided sufficient provision in accordance to the IFRS9
7. The tendency of portfolio quality
Asset quality continues to improve. NPLs of both credit card and personal loan has been constantly decreased since year 2013; as a result, the total portfolio’s NPL dropped. NPL in the first half of 2018 are as follows
8. What are the rational behind the success of KTC debt collection, and what are the company's expectations of the future collections trend.
The company is proactive in all steps of the process. With Screening that starts at card initiation, proven collection process, and management that monitor collection closely, the company is proactive in all steps of the collection process. Although bad debt recovery growth is increasing, as a consequence of the high amount of the recovered debt; growth in the future years may not be as that of the past.
9. What are the reasons behind the declined growth in both YoY and QoQ
Since the work days in the second quarter are fewer than that of the other quarters, collection growth declined by 6% Analysis of bad debt recovery should be be observed over a significant period of time and should not be compared in a quarterly manner since collection has many factors within its process such as seasonal effect, litigation process, as well as reconciliation. Therefore quarter on quarter figures should not be used in short term analysis. The company expects recovery income growth to continue
10. What is dividend payment policy
The Shareholders’ meeting no. 1/2003 on March 25, 2003 approved the dividend payment policy to pay approximately 40 percent of net profit after deduction of income tax and appropriation for a legal reserve.
The company made payment of dividends for the year 2016 to the shareholders at the rate of Baht 4 per 1 ordinary share or equivalent to 41.3% of net profit. The dividend payment in the year 2017, it was paid at Baht 5.30 per 1 ordinary share or equivalent to 41.4% of net profit. Later in the year 2018, the payment was made at Baht 0.82 per 1 ordinary share or equivalent to 41.1% of net profit.
11. KTC Shares after the Par Change
On July 6, 2018, the company held the extraordinary general meeting No. 1/2018 to approve the change in the company’s registered par value from 10 Baht to 1 Baht per share. And, effectively on July 13, 2018, the new registered par value had resulted in the company’s common shares increased from 257,833,407 shares, par value at 10 Baht per share, to 2,578,334,070 shares, par value at 1 Baht per share.
12. 2019 Targets
For 2019, KTC targets no less than 15% credit card spending growth. Yet in the first half, credit card spending grew only 10.5%. The company has also targeted 10% portfolio growth, but growth was only at 7% (YoY) in the second quarter. Meanwhile, total portfolio NPL at the end of second quarter was 1.1%, in line with the target. In term of profit, the company has anticipated to attain its profit growth of 10% from last year, and for the first half of 2019 it already achieved the profit of 2,913 MB, a 16% growth.
13. Current events
- Pico Finance and Nano Finance
KTC Nano Co., Ltd. And KTC Pico Bangkok Co., Ltd. were incorporated on May 24th, 2019 to provide service in Pico Finance and Nano Finance businesses. KTC and Krung Thai Bank PCL, hold 75.05% and 24.95% share of each subsidiaries respectively. Furthermore, KTC reported a consolidated financial statement with a total of 53 MB investment in both subsidiary. However, both subsidiaries are still in the process of obtaining their business licenses and are expected to be operational in the third quarter of this year.
- Rules and Regulations
- Effect of the upcoming DSR measures from the bank of Thailand
The Bank of Thailand have not finalized its measures to control DSR, the bank only provided policy that guide financial institutions to implement responsible lending to control house hold debt problem.