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 third quarter of 2018, each business’s total receivables are shown in the chart below.
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.
Summaries of the Bank of Thailand Regulatory changes effective on 1st September 2017
According to the Bank of Thailand updated rules governing credit cards and personal loans to curb public overspending; summaries of the regulatory changes and the affects to the company are as follows:
Impacts of the Bank of Thailand regulatory changes on the company
- The new credit limit for credit card and personal loans will come into effect for new applicants for the loans only (Approved after 1 Sep 2017). Consequently existing customer will be motivated to retain their credit limit resulting in a better portfolio quality
- Total portfolio growth may decline due to lower in credit limit for new applicants both credit card and personal loan (Approved after 1 Sep 2017).
- The ceiling for credit card interest rate charged on credit-card loans will be reduced from the current 20% to 18% per year which will affect a fraction of the total revenue (on revolving credit card portfolio).
- Since the new regulation only affecting new credit card and personal loan applicants, the total portfolio would improve in quality due to the inability to increase credit line for lower income customers and resulting in reduced provisioning of the portfolio.
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 third quarter of 2018, cost of fund accounted for 3.0%; meanwhile, the proportions of each borrowing component are stated in the chart below
Debt obligation of the company
The company’s debt covenant has limited to Debt to Equity ratio lower than 10 times. In the third quarter of 2018, the ratio is only at 3.85 times.
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.
The calculation of KTC Allowance
Many factors affect the calculation of the allowance for doubtful accounts such as the change of the portfolio, portfolio quality, and the provision rate. Allowance are calculated by the following formula :
Where : ECL = Expected Credit Loss “Allowance for Doubtful Accounts”
PD = Probability of Default
LGD = Loss Given Default (LGD = 1 – Recovery Rate)
EAD = Exposure at Default “Ending Port Balance ”
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 third quarter of 2018 are as follows.
Total card spending of KTC versus Industry
KTC credit card spending in 2018 continued to grow but at a decelerating rate. Growth of the company’s credit card spending in the third quarter of 2018 was at 8.7%, compared to that of the industry which was 10.5%, while the company’s market share stood at 11.1%, compared to 11.3% at the same period of previous year. Nevertheless, to cultivate the targeted consumer’s confidence, the company had enhanced its strategies by focusing mainly on implementing new innovations, eliminating unnecessary procedures, and promoting customer satisfaction. Also, to successfully achieve the company’s targets, marketing campaigns will be consistently reviewed and adjusted to maintain the competitive edge in the ongoing changing environment.
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 2015 to the shareholders at the rate of Baht 3.25 per 1 ordinary share or equivalent to 40.4% of net profit. The dividend payment in the year 2016, it was paid at Baht 4 per 1 ordinary share or equivalent to 41.3% of net profit. Later in the year 2017, the payment was made at Baht 5.30 per 1 ordinary share or equivalent to 41.4% of net profit.
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
For year 2018, KTC has targeted to achieve credit card spending growth of no less than 15%, yet for the first nine months, it only expanded at 9%. The company has also set the target growth of receivables portfolio at 10%, yet, at the end of third quarter, the growth was only at 6% (yoy). Nevertheless, the company’s NPL at the end of third quarter stood at 1.2%, lower than expected; the company expects net income of 2018 to be around 5,000 MB (+/-)