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 2017, each business’s total receivables are shown in the chart below.
What are the company’s major sources of income
The major sources of income are interest income and fee income. The other revenues consist of income from Circle loan and miscellaneous, 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. 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.
- 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 2017, cost of fund accounted for 3.2%; 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 2017, the ratio is only at 4.85 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.
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 2017 are as follows.
Total card spending of KTC versus Industry
The industry's credit card spending in the nine months of 2017 was 1,116,119 MB, grew 4.2% compared to the 7.1% growth in same period of 2016; showing sign of slowed growth displayed by the charts below.
What is dividend payment policy
The Shareholders’ meeting no. 1/2003 on March 25, 2003 approved the dividend payment policy to not less than 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 2014 to the shareholders at the rate of Baht 2.75 per 1 ordinary share or equivalent to 40.4% of net profit. The dividend payment in the year 2015, it was paid at Baht 3.25 per 1 ordinary share or equivalent to 40.4% of net profit. Later in the year 2016, the payment was made at Baht 4 per 1 ordinary share or equivalent to 41.3% of net profit.
For 2018, the Company has targeted to increase credit card spending growth at least 15% yoy, to expand receivables portfolio by more than 10% yoy, and to maintain NPL at the same level as the previous year. Thus, KTC is expected to gain higher profits in 2018 than 2017.