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The overall economic situation in Thailand in 2018, including the deteriorating and highly volatile financial and capital markets caused by external factors, has gradually and adversely affected businesses. Yet, Thailand was able to fairly react to such situations and changes due to its sound financial stability. Compared with the previous year, Thailand’s economy in 2018 was still able to grow by 4.1%
The overall market capitalization of the Stock Exchange of Thailand (“SET”) and the Market for Alternative Investment (“mai”) at the end of 2018 was valued at Baht 16.2 trillion, down 9.5% from the end of 2017. The average daily securities trading value of the SET and mai in 2018 equaled Baht 57,674 million, an increase of 15.1% from 2017. The SET index at the end of 2018 closed at 1,563.88 points, down 10.8% from 1,753.71 points at the end of 2017.
In 2018, the finance and banking industry saw several developments, such as the waiver of financial transaction fees, the sharp increase of online transactions, the rise in technology investment of all commercial banks to maintain their status while urgently reducing the cost of their branch networks and ATMs, etc. In addition, Thailand saw rapid and constant improvements in the fundamental structure of electronic transactions in terms of the Electronic Know-your-Customer (e-KYC) process, the National Digital Identification (NDID) and big data.
The above-mentioned economic situation and changes in the finance and banking industry have had both positive and negative impacts on Kiatnakin Phatra Financial Group (“the Group”). The performance of each business type was diverse, for instance, the investment banking business and the equity and derivatives trading business generated outstanding profits. The securities brokerage business, the asset management business and the special asset management business generated good profits although the market environment was not in favor of those businesses. Meanwhile, medium and long-term investment using directional trading strategy was inevitably affected by the fluctuation of the global economy. This led to the Group’s moderate and under-expected result of operation in 2018 with net profit and total comprehensive income of Baht 6,042.0 million and Baht 5,123.2 million respectively, which increased by 5.3% and decreased by 16.2% from that in 2017 respectively. The Group’s return on average asset (ROAA) was at 2.1%, compared with 2.3% in 2017, whereas the return on average equity (ROAE) equaled 14.5%, up from
In terms of the commercial banking business, the Bank’s loan portfolio in 2018 grew at the highest rate in the industry at 18.5%, up from 9.3% in 2017, due to the Bank’s loan growth in almost all loan products. The growth of corporate lending, commercial lending and Lombard loans was recorded at 51.0%, 26.0% and 26.7% respectively. Meanwhile, the growth of retail lending comprising auto hire purchase loans, personal loans, housing loans and micro SME loans was at 11.5%. For asset quality, the non-performing loan (“NPL”) to total loan ratio was at 4.1% at the end of 2018, improving from 5.0% at the end of 2017.
For the capital market business, Phatra Securities Public Company Limited (“PTSEC”), which is a company in the Group, had a total market share in the securities brokerage business in 2018 at 4.6%, ranking seventh among thirty-eight brokerages. The assets of high-net-worth individuals under advisory at the end of 2018 totaled approximately Baht 475 billion, up from approximately Baht 452 billion at the end of 2017. In 2018, PTSEC was appointed as financial advisor and underwriter of the Thailand Future Fund and securities of several large companies. In the meantime, Phatra Asset Management Company Limited (“PASSET”), which is another company in the Group operating mutual fund and private fund businesses, had assets under its management at the end of 2018 totaling approximately Baht 92 billion, rising from 2017 by 4.0%.
In addition to the above-mentioned financial results, during 2018 the Group had launched significant innovations and developments in products and services for its competitive efficiency and sustainable growth. These include the KK Virtual Branch; KK Magic Mirror; KK e-Banking mobile application to facilitate buying, selling and switching mutual funds via mobile phone; Banking as a Service allowing companies or outsiders to connect in order to conduct financial transactions via their own system; new types of more sophisticated structured notes such as Rainbow ELN and Autocallable Fixed Coupon Note offering better benefits for investors; basic account to respond to the policy of the Bank of Thailand and the Thai Bankers’ Association which aims for Thais to have better access to financial services to improve their standard of living; family advisory services to respond to clients’ need in transferring wealth to their successors; etc.
In terms of information technology, the Group recognizes the importance of stability and growth in its business operation, therefore, it has invested in several key IT projects, including a new core banking project with the objective to revamp the key processes of core banking, upgrade IT infrastructure, develop banking services to offer equal or better services than those of other banks of the same class, and enable the Bank to offer products and services which meet the market’s needs and increase its competitive advantage. This transformation has led to a big change in its IT architecture, structure stability and capability and paved its way in the digital banking era.
For risk management, as a consequence of the economic situation as mentioned above, last year the Group has improved its risk management practices in a range of areas, such as Bureau Score for personal loans, housing loans and SME product program loans; risk models for auto hire purchase loans; risk grade for personal loan collection and auto hire purchase loan collection via telephone; portfolio scrubs for risk management and loan restructuring plan in case debtors have increasing significant risk; Net Stable Funding Ratio (NSFR) according to Basel III for liquidity risk management; etc. For corporate governance, the Group strives to upgrade its corporate governance to be more comparable to international standards. The Board of Directors, therefore, annually reviews its Corporate Governance Policy. During 2018, the Board of Directors approved the revision of such policy on various topics, for example, board structure; rules, duties and responsibilities of the Board of Directors; term of directorship; board meeting; board performance evaluation; directorship in other companies of directors; channels for whistleblowers; role, practice and responsibilities of the Bank towards clients, community, society and environment; etc. Moreover, the roles, duties and responsibilities of sub-committees under the Board of Directors’ supervision have been amended in many aspects, including the oversight of Group companies to ensure their operations are in accordance with the Group’s direction, strategies and main goals; follow good and efficient risk management and comply with laws, regulations and relevant policies. With this great commitment to elevating good corporate governance practices, the Bank has achieved several governance honors and awards including an “Excellent” rating from the annual corporate governance survey in the year 2018 from the Thai Institute of Directors Association (“IOD”) and the awarding of five logos from the IOD.
In terms of anti-corruption, the Bank intends and is committed to taking a stand against corruption in any form. In 2018, the Bank and the Group companies in the capital market business, in conjunction with Thailand’s Private Sector Collective Action Coalition Against Corruption (“CAC”), have announced the No Gift Policy, which is consistent with the Group’s continuous practices on anti-corruption. Moreover, the Bank has cooperated with the Thai Bankers’ Association to declare the No Gift Policy to confirm its intention against corruption in any form and support transparency and good corporate governance in its business operation. Additionally, PASSET has been re-certified as a full member of the CAC in 2018, following the Bank and other companies in the capital market business which have been re-certified since 2017.
Furthermore, the Group realizes the importance of its responsibility to the society, community and environment. Therefore, its business operation strictly complies with the written policy for conducting business with responsibility towards society. Consequently, KKP has been nominated by the SET as a Thailand Sustainability Investment 2018 and the Bank has been selected by THAIPAT’s ESG Rating Unit as one of the 100 listed companies on the list of ESG100 in the year 2018 for outstanding sustainability performance in environmental, social and governance aspects for the fourth consecutive year.
For the year 2019, the challenges facing the Group’s business operation are the direction of the global economy and trade, the political situation, the health of the domestic economy, tourism, export, price trends for agricultural products, household debt, NPLs, inflation, Baht value, public and private investment and financial technology. The Group will carefully operate its business in accordance with its vision to become a financial institution which enables success for clients’ businesses and investment management and expand its investment in businesses which have good trends and in which the Group has expertise and competence. It will focus on improving its personnel and information technology, generating innovations and know-how as well as embracing adaptability in this fast-moving environment. Also, the Group will constantly endeavor to improve its corporate governance and risk management in all aspects in order to minimize the potential for damage to its operations and reputation and create sustainable growth.
The Group’s operation benefits from the support and cooperation of all parties including shareholders, clients, business partners, employees and executives. On this occasion, the Board of Directors would like to thank you and wish you happiness and success in your work and family life.
Mr. Supol Wattanavekin Mr. Banyong Pongpanich
Chairman of the Board of Directors Chairman of the Executive Committee