Thank you for investing in our company. The year 2016 marks the year we have been growing together for half a century. Our goal is to continue to deliver long-term value to you, our shareholders, as we execute our strategy to serve our customers and clients. In 2015, we completed the first part of our three-summit strategy in which we spent considerable time and resources developing the foundation for long-term growth. This year, we will start our journey into the second summit with the goal of being Thailand’s leading bank, not just in terms of size but as well as profitability. We still have a great deal of work ahead, but we are making good progress toward becoming the best place to work in our community, as is the goal of our third summit.
Last year was again challenging for financial institutions. Economic and geopolitical uncertainties continued to surface, causing high volatility in the financial systems, and participants responded almost at a moment’s notice. The global and local economic recovery remained subdued with sustained low interest rates continuing to pressure net interest margins and higher household debts pressuring asset quality. In addition, our industry continued to face new regulatory requirements, increasing demands for higher capital and liquidity, as well as threats from the cyberspace. We started to address many of these issues when we embarked on the first summit - we improved efficiency and effectiveness of key processes while also strengthening risk controls so that we are prepared to operate in whatever crisis may arise.
Despite the exogenous forces, we remained focus on our core business strategies of serving our customers and clients with leading financial solutions, and providing an engine to help the real economy grow. When we measure our results, we not only review financial results, but we also look at multiple indicators of health. These measures help us gauge the progress we have made for all our stakeholders are sustainable and responsible. We have expanded our capabilities, extended our service & product offerings, and optimized our technology by attracting, training and retaining talented people.
Maintaining this focus takes tremendous discipline. We thank our management team and our teammates, employees, who have worked hard, day in and day out, to create the organization we are today for all our stakeholders. Krung Thai today is one step closer toward the reach of our third summit. Together with risk and operational focus, our ability to stay disciplined will serve us well into being the best-in-class company and the best place to work.
Below, we outlined our 2015 performance as measured quantitatively.
As at December 2015, KTB maintained its #1 position across all listed Thai financial institutions in terms of asset size (the bank’s financial statement), market share of deposits and market share of loans.
Despite the unfavorable economic condition, KTB delivered 2015 full-year pre-provision operating profit (“PPOP”) of Baht 66 billion, an increase of 9.7% from that of 2014. However, we reported net profit of Baht 28 billion, a decrease of 14.2% from that of 2014. During a “normal” credit cycle and environment, we should expect to see growth in both PPOP and net profit as we saw during the years 2010-2013, before the credit environment started to deteriorate in 2014. Essentially, the year’s financial results were affected by increasing credit cost especially the extra provision we set for a large steel company. The 2015 growth in PPOP was mainly attributable to core items - the substantially higher net interest income and non-interest income.
Net interest income grew 4.8% from that of 2014. Relative to our competition, our company fared extremely well. Despite the low interest rate environment, our company has managed to maintain net interest margin by two forces both of which are results of our first summit strategic focus – through a diversified portfolio with expansions in Retail and SME, and through actively managing our deposit costs.
Non-interest income (net) grew 15.7% year-on-year, with a sizable portion of gain driven from dividend income recorded in 3Q15. Net fee income also grew 14.6% as we focused on increasing the portion of fee income structure as part of generating sustainable revenue growth.
Operating Expenses increased at a slower pace than income, resulting in our improved cost-to-income ratio to 43.7% from 44.6% in 2014.
Credit quality deteriorated as the rest of the industry. NPL ratio stood at 3.2% at the end of the year. The main drivers were the steel company and from the SME and mortgage portfolios. We have set aside Baht 30.5 billion of loan loss provision in 2015. We remain focused on controlling the credit quality and have improved our underwriting processes.
We have benefited from a healthy balance sheet and maintain a solid capital base. Our CAR ratio at the end of the year stood at 15.2%, higher than the regulatory requirement of 8.5%.
We’re a strong company making steady progress and delivering responsible growth. We believe we have a deep responsibility to our community including our shareholders, clients and all our employees. In addition, throughout our history, we have always believed that our obligations extend beyond that. For us, public service means standing ready to support the government and move the economy forward. We work incredibly hard to uphold all our obligations every day. We take great pride in being the government’s bank of choice and have for the past fifty years played a key role in supporting the government fiscal policy. Last year, we were one of the main lenders in soft loans for SMEs. As part of our corporate responsibility effort, we make meaningful differences to the people who live and work in the communities in which we operate. In our first year, we employed 1,247 employees in 81 branches. Today, we employ over 24,000 people with over 1,200 branches serving customers and clients all over the country. We take care of over Baht 2,135 billion of your deposits which grew from Baht 4.4 billion. Your trust ranked us the #1 position across all financial institutions. In the past year, we, the Krung Thai team, received many awards by domestic and international agencies. We are humbly delighted and appreciate all the recognitions, yet we are not done.
For 2016, we are stepping up our game. The year 2016 marks our golden anniversary. As with the past 50 years, we will continue our deep commitment to being good corporate citizens. It is an essential part of what we do and who we are as an organization. We are looking forward to 2016 and starting our second summit journey.
We feel enormously fortunate to be part of the remarkable 50-year journey of this exceptional company and look forward to growing together and continuing this wonderful legacy. On behalf of the Krung Thai board of directors and its management, we express our deepest gratitude to our people, our clients and customers, the community and our shareholders.
Dr. Somchai Sujjapongse
Chairman of the Board of Directors
Mr. Vorapak Tanyawong