Krung Thai Bank aims to reduce its non-performing loan ratio to international standards over the next three years through a stronger policy on loan-loss reserves and control of bad assets, according to President Apisak Tantivorawong.
The net NPL norm of the international banking industry is 2% of total debt outstanding of each bank. KTB recorded net NPLs for the second quarter this year of 48.3 billion baht, or 3.64% of its portfolio of around 1.21 trillion baht. Gross NPLs were 81.38 billion baht or 5.98%. The bank's non-performing assets stand at around 40 billion baht currently.
Mr Apisak said the conservative policy on loan-loss provision and strong bad-debt management were the key strategies to reduce bad debts effectively. The bank has normally set aside a loan-loss reserve of 500 million baht per month, and would continue to do so over the next three years despite improving asset quality. Strong bad-debt management will also help pare bad loans more effectively than asset sales, he said.
KTB, the country's second largest bank in terms of asset size, set provisions for bad debts of 1.51 billion baht in the second quarter, down 0.3% from the first quarter and 3.5% year-on-year.
If NPLs are reduced to the international standards, the costs of bad-asset management would decrease as well as the bank's profitability will be strengthened. KTB has controlled bad debts within targets and its coverage ratio is staying at a satisfactory level of higher than 50% even in the face of uncertainties both at home and abroad. However, the bank's NPL ratio remains higher than other local large banks, he said.
Kasikornbank, the country's third largest financial institution, reported the lowest gross NPL ratio among large-sized banks, at 3.2% in the second quarter, followed by the country's biggest Bangkok Bank, at 4.1%.
KTB posted net profit in the second quarter this year of 3.37 billion baht, up 9.7% quarter-on-quarter and 31.2% year-on-year. Key drivers for earnings this quarter are an increase in interest income and a decrease in provisioning expenses.