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By:
Chananun
Pantira
Pantharee
Tanwa
Thammasat
KasikornBank Group Consulting
AGENDA
• Company Profile
• Situation Analysis
• Issues and Objectives Identification
• Recommendations
• TimeLine
• Financial Justification
• Key Success Factors
• Conclusion
Thammasat
KasikornBank Group Consulting
Company Profile
• Leading KasikornBankGroup
Financial Institution in Thailand
• Founded in 1945
• Listed on SET in 1976
Kasikorn Bank
• Reinvented the Entire Corporation in 2005
as KLeasing KFactoring
“KASIKORNBANKGROUP”
KSecurititesitselfKAsset
promoting as Management
‘full-range of financial service provider’
KResearch
• Moving toward Center
“K Excellence” Concept
Mr.Banthoon Lamsam
CEO, KasikornBank
Thammasat
KasikornBank Group Consulting
Situation Analysis
Thammasat
KasikornBank Group Consulting
Situation Analysis
Promote “Universal
Intense Banks”
Competition
Opening FTA with USA
Thammasat
KasikornBank Group Consulting
Situation Analysis
Promote “Universal
Intense Banks”
Competition
Opening FTA with USA
Thammasat
KasikornBank Group Consulting
Situation Analysis
Thammasat
KasikornBank Group Consulting
Situation Analysis
TMB 15.9%
BBL 27.72%
KBank 29.46%
Corporate SME 36.39% KTB 17.84%
45.45%
End consumer SCB 9.07%
18.16%
TMB 13.64%
BBL 24.97%
KBank is Losing its
Leading Position to BBL
KBank 12.22%
TMB 9.86%
SCB 14.88%
KTB 34.29% BBL 20.83%
KBank 15.81%
SCB 32.04%
KTB 21.45%
Thammasat
KasikornBank Group Consulting
Issues Identification
Thammasat
KasikornBank Group Consulting
Issues Identification
Issues Objectives
Thammasat
KasikornBank Group Consulting
Recommendation I
Target Selection
Fast Growing
Segment :
• Corporate 29%
Emerging
Opportunity • End Consumer
15%
• SME 56%
K-Bank’s
Current Focus
K Bank Customer Segment
Thammasat
KasikornBank Group Consulting
Recommendation I
Target Selection
NIM 3%
6%
Thammasat
KasikornBank Group Consulting
Recommendation I
SME
Winning Strategy
Thammasat
KasikornBank Group Consulting
Recommendation I
I. SME Winning Strategy
ng Off Intense Competition and Maintain Leadership Position in Banking Business
+ “Alternative” Channel
along with Traditional Branches
- Production
- Retail
- Wholesales
- Service
Implementation
E-Channel
Marketing
Communication CRMknow-how and innovativeness
Capitalize on our technological
Match with KBank’s Lesser Number of Branches
• Data Collection Human Resource
• Customer Concentration
Information Technology
Thammasat
KasikornBank Group Consulting
Recommendation I
I. SME Winning Strategy
ng Off Intense Competition and Maintain Leadership Position in Banking Business
Communication Strategies
Thammasat
KasikornBank Group Consulting
Recommendation I
I. SME Winning Strategy
ng Off Intense Competition and Maintain Leadership Position in Banking Business
Communication Strategies
Product/Service
Quality Our Proposing Campaign…
Enhancement “Tailored Communication
Message”
Target Audience: Existing and Potential SME
Operators
Thammasat
KasikornBank Group Consulting
Recommendation II
Thammasat
KasikornBank Group Consulting
Recommendation II
II. Synergy Formulation Strategy
Enhancing Collaboration Among Subsidiaries
Informational Flow
Promoting Information Sharing
Thammasat
KasikornBank Group Consulting
Recommendation II
II. Synergy Formulation Strategy
Enhancing Collaboration Among Subsidiaries
•Physical Distribution
Increase Availability of all Subsidiaries in
Majority of Branches
•Promotion Package
Implementation Tactics:
• Product Bundling
• Cross – Selling
Thammasat
KasikornBank Group Consulting
Timeline
2006 2007 2008 2009 2010 2011
Activities
Customer Reachout
Thammasat
KasikornBank Group Consulting
Financial Justification
90,000
50,000
Strong synergy among operations
40,000
30,000
Strengthen position in SMEs segment
20,000
10,000
0
2005 2006F 2007F 2008F 2009F 2010F
Thammasat
KasikornBank Group Consulting
Financial Justification
25,000
20,000
15,000
10,000
Total Growth = 55%
5,000
CAGR = 9.10%
0
2005 2006F 2007F 2008F 2009F 2010F
Thammasat
KasikornBank Group Consulting
Financial Justification
Capital Expenditure
Increase in PPE needed to support the growth
ie. Increase in Branches
Infrastructure Improvement
Information system upgrade
ETC.
Total Capital Expenditure in the next
48.76 Billions Baht
5 years
Expenses
Product/Service Quality Enhancement
Research and Development 100-200M / Year
CRM Cost 200-300M / Year
K-Answer Campaign 200-400M / Year
Thammasat
KasikornBank Group Consulting
Financial Justification
Thammasat
KasikornBank Group Consulting
Key Success Factor
Target
Selection
Collaboration Customer
Among Orientation
Subsidiaries
Thammasat
KasikornBank Group Consulting
Issues are Solved…
Issues Strategies Objectives
Q&A Session
Thammasat
KasikornBank Group Consulting
Slides Navigator
Thammasat
KasikornBank Group Consulting
Back Up Navigator
Issues I Issue II
Target Selection Synergy formulation
• Why not Select Corporate?
SME Winning Strategy • Increasing Availability of 5 subsidiaries i
• SME Innovative and Personalize KBank
• Why not relied on Physical Branches? • How can collaboration leading to becom
• Alternative “E-Branch” • Cross selling
• E-banking • Product Bundling
• K-Answer
• K-answer contradict current position or not?
• Why SME?
• Pricing for SME
• Competitive Analysis For SME Sector
Thammasat
KasikornBank Group Consulting
Finance Navigator Misc.
• Loan Growth Justification • SWOT
• Loan Growth Quantification • Competitive Analysis
• • Porter’s 5 Forces
Non-Interest income growth Justification
• Fee income strategy for Retail Segment
• Deposit growth Justification • Are we not concerning Fee income for En
• Balance Sheet/1, /2 • Why not emphasized on fee income des
• Income Statement/1, /2
• Fee Income Breakdown – 2005
• High Cost-Income Ratio
• Assumptions
• Ratios • Merging opportunity
• Cost Estimation Justification • International Opportunity
• Financing Options Justification
• How can loan mix represent the whole re
• Return on Investment Justification
• Revenue Breakdown – KBANK Historical
• Situation Analysis
Thammasat
KasikornBank Group Consulting
Strengths
• Local knowledge over foreign competitors
• Financial position: high margin (NIM)
• Qualified human resources
• Good management (Asia’s Best Management Company)
• Innovative (first Thai bank that offer full financial services)
• Lowest NPL compared top 5 bank: good selection and management of loan
customer
Thammasat
KasikornBank Group Consulting
Weaknesses
• Low number of branches
• High operating expense (cost to income ratio)
• Low customers’ confidence in terms of well establishment
• No distinctive competency
Thammasat
KasikornBank Group Consulting
Opportunities
• Increase penetration to household consumers
• Increase accessibility to customers in rural areas
• Merger & Acquisitions with international/local banks
• Growth in fee income
• Insurance service
• International Expansion
Thammasat
KasikornBank Group Consulting
Threats
• FTA with the U.S. intense competition from foreign banks
• Increase competition from smaller banks because of mergers and
acquisitions trend, specialized financial institutions, and non-
financial institutions
• Competition from
• Rising oil price
• Increased interest rates slow down investment rates
• Being in Banking industry makes it volatile to changes in
government regulations
Thammasat
KasikornBank Group Consulting
Competitive Analysis
BBL Krung Thai SCB KBank Thai Military International
Bank Bank Bank
Total Asset 1.4 trillion baht 1.2 trillion baht 0.93 trillion 0.89 trillion 0.73 trillion N/A
Thammasat
KasikornBank Group Consulting
Porter’s 5 Forces
Threat of Substitute Products
High: the industry is very competitive, everyone is always trying to come
up with new and innovative products
Customers
Supplier Bargaining Power
Rivalry among Competing Sellers
Bargaining Power Corporate: high
High: from top5 Thai banks, smaller
Low: from the companies that we SMEs: low
banks that are reducing in numbers but
outsource from such as IT providers Retail: low
increasing in size from merger
company &acquisitions trend, specialized
financial institutions, non-financial
institutions, and foreign banks
Thammasat
KasikornBank Group Consulting
Fee income strategy for Retail Segment
• Product offering
– Credit card
– ATM
• Offer cross selling and product bundling
• Promotion
– PR
– Marketing Event
• Distribution channel
– Set up boot at department store for credit card application
Thammasat
KasikornBank Group Consulting
SME Innovative and Personalize
• Innovative – be the first to offer financial products that are
not yet served in Thailand i.e. Money market mutual fund
• Personalize
– Based on type of business
• Production
• Retail
• Wholesale
• Service
– Provides Personal consultant
• Experience on each industry
• Provides guidance for new SME
– Call center
• 24 hours service providers
Thammasat
KasikornBank Group Consulting
Why not relied on Physical Branches?
Thammasat
KasikornBank Group Consulting
Alternative “E-Branch”
Thammasat
KasikornBank Group Consulting
E-banking
• E- Banking Channel
– Internet
– Phone
– ATM
Thammasat
KasikornBank Group Consulting
High Cost-Income Ratio
Thammasat
KasikornBank Group Consulting
Why not Select Corporate?
Thammasat
KasikornBank Group Consulting
K-Answer
Thammasat
KasikornBank Group Consulting
K-answer contradict current position or not?
Thammasat
KasikornBank Group Consulting
Cross selling
• The strategy of pushing new products to current customers based on their
past purchases – thus the product is personalized
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KasikornBank Group Consulting
Product Bundling
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KasikornBank Group Consulting
Are we not concerning Fee income for End
consumer?
• No we are still offering services to end consumer but we believe
that SME is the right target at the moment
• According to the case, product that will boost the fee income
consists of:
– Under writing
– L/C fee
– Foreign Exchange
– Trade finance transaction
• These are all business source
• Fee income from end consumers account for only 20% of total fee
income
Thammasat
KasikornBank Group Consulting
Merging opportunity
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KasikornBank Group Consulting
How can loan mix represent the whole
revenue structure?
• Loan Mix tell us who are each customer segment and in
what proportion they account for
• Because
– Loan represent main source of income for banks (63%)
– The customers that lend money from the banks should do
other activities at the same proportion
Thammasat
KasikornBank Group Consulting
Why SME?
• In 2004
• All business consists of
2,166,621
• SME consists of 2,161,577
2200
• Consists of 99.8% of all
2150
businesses in Thailand
2100
• Growth rate 8 %
2050 Total Business
SME
2000
1950
1900
2003 2004 In thousand
Source: http://www.sme.go.th
Thammasat
KasikornBank Group Consulting
Why not emphasized on fee income despite
slow economic expansion?
Industry Ratio 2003 2004 2005
Net Interest income growth 12% 13% 43%
Fee income growth 3% 10% 15%
% of fee income to total income 25% 24% 20%
NPL 12.87% 10.92% 8.29%
LDR 87% 91% 90%
NIM 2.11% 2.64% 2.85%
Thammasat
KasikornBank Group Consulting
Competitive Analysis For SME Sector
Thammasat
KasikornBank Group Consulting
International Opportunity
• We have plan to expand internationally but it’s still not our main
focus in this presentation because there are still other issues that
needed to be taken care of in a short run
Thammasat
KasikornBank Group Consulting
How can collaboration leading to becoming
truly universal bank?
• Collaboration would make all subsidiaries work together
very well – as if it is one company
• Ultimately, it will allow the customers to stop at any of the
KBank branches and be served with the service of all
subsidiaries under KGroup
• Thus, KGroup would become a “truly Universal Bank”
Thammasat
KasikornBank Group Consulting
How can we evaluate the success of synergy
realization?
• Measure the success by
– Percentage Income from cross-selling and product bundling
– Reduce in communication errors between business units
Thammasat
KasikornBank Group Consulting
Loan Growth Justification
• With the above information, we forecast the loan portion of income fairly accurately.
Thammasat
KasikornBank Group Consulting
Loan Growth Quantification
2005 2006F 2007F 2008F 2009F 2010F
Loan market growth
SMEs 12% 12% 12% 12% 12% 12%
Consumer 15% 15% 15% 15% 15% 15%
Corporate 4% 4% 4% 4% 4% 4%
Loan Income
SMEs 17,712 20,199 23,377 27,027 31,216 36,021
Consumer 4,744 5,458 6,276 7,218 8,300 9,545
Corporate 9,172 9,369 9,338 9,289 9,661 9,590
Total 31,628 35,025 38,991 43,533 49,177 55,157
Loan Amount
SMEs 184,698 188,084 194,353 200,623 206,892 213,162
Consumer 99,183 99,183 99,183 99,183 99,183 99,183
Corporate 76,613 75,234 72,099 68,964 68,964 65,829
Total 626,946 693,572 769,048 855,270 971,869 1,092,212
Thammasat
KasikornBank Group Consulting
Non-Interest income growth Justification
• Since, we’re targeting SMEs, and our position is to be a full-one stop service,
therefore, it is highly probable that our customer will use more than one of our
services.
• So we believe it is logical for us to forecast the growth in none-income item to
grow along side with our loan portion of our income, and at a slightly faster rate
due to the smaller denominator.
Thammasat
KasikornBank Group Consulting
Deposit growth Justification
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KasikornBank Group Consulting
Balance Sheet/1
2004 2005 2006F 2007F 2008F 2009F 2010F
Assets
Cash 13,536 14,913 16,244 17,798 19,583 3,799 9,157
Interbank and money market items
Domestic items
Interest bearing 1,218 4,926 4,926 4,926 4,926 4,926 4,926
Non-interest bearing 2,135 1,709 1,709 1,709 1,709 1,709 1,709
Foreign items
Interest bearing 71,969 58,795 58,795 58,795 58,795 58,795 58,795
Non-interest bearing 927 499 499 499 499 499 499
Total Interbank and Money Market Items - net 76,249 65,929 65,929 65,929 65,929 65,929 65,929
Securities purchased under resale agreements 19,040 9,500 9,500 9,500 9,500 9,500 9,500
Investments
Current investments - net 33,325 50,105 50,105 50,105 50,105 50,105 50,105
Long-term investments - net 76,770 49,009 49,009 49,009 49,009 49,009 49,009
Investments in subsidiaries and associated companies - net 462 450 450 450 450 450 450
Total Investments - net 110,557 99,564 99,564 99,564 99,564 99,564 99,564
Loans and accrued interest receivables
Loans 592,588 626,946 693,572 769,048 855,270 971,869 1,092,212
Accrued interest receivables 2,455 1,745 1,930 2,141 2,381 2,705 3,040
Total Loans and Accrued Interest Receivables 595,043 628,691 695,502 771,189 857,651 974,574 1,095,252
Less Allowance for doubtful accounts -41,465 -34,766 -38,568 -42,765 -47,559 -54,043 -60,735
Less Revaluation allowance for debt restructuring -4,878 -2,672 -2,672 -2,672 -2,672 -2,672 -2,672
Total Loans and Accrued Interest Receivables - net 548,700 591,253 654,263 725,752 807,419 917,859 1,031,845
Properties foreclosed - net 17,397 17,463 17,463 17,463 17,463 17,463 17,463
Customers’ liability under acceptances 743 857 857 857 857 857 857
Premises and equipment - net 19,747 21,440 30,359 34,544 45,045 53,279 53,830
Intangible assets - net 3,523 4,900 4,900 4,900 4,900 4,900 4,900
Derivative revaluation 6,349 3,278 3,278 3,278 3,278 3,278 3,278
Other assets - net 9,133 8,211 8,211 8,211 8,211 8,211 8,211
Total Assets 824,974 837,308 910,567 987,797 1,081,749 1,184,639 1,304,534
Thammasat
KasikornBank Group Consulting
Balance Sheet/2
Liabilities and Shareholders’ Equity
Deposits
Deposits in baht 701,713 684,056 725,099 775,856 834,046 900,769 968,327
Deposits in foreign currencies 3,856 3,725 3,725 3,725 3,725 3,725 3,725
Total Deposits 705,569 687,781 728,824 779,581 837,771 904,494 972,052
Interbank and money market items
Domestic items
Interest bearing 8,068 15,681 15,681 15,681 15,681 15,681 15,681
Non-interest bearing 3,183 3,385 3,385 3,385 3,385 3,385 3,385
Foreign items
Interest bearing 19 152 152 152 152 152 152
Non-interest bearing 256 290 290 290 290 290 290
Total Interbank and Money Market Items 11,526 19,508 19,508 19,508 19,508 19,508 19,508
Liability payable on demand 7,426 5,904 5,904 5,904 5,904 5,904 5,904
Borrowings
Short-term borrowings 3,843 7,557 13,371 16,298 21,706 22,893 37,473
Long-term borrowings 19,768 20,170 32,634 40,964 55,028 71,681 87,903
Total Borrowings 23,611 27,727 46,005 57,262 76,734 94,574 125,376
Bank’s liability under acceptances 743 857 857 857 857 857 857
Derivative revaluation 1,441 3,034 3,034 3,034 3,034 3,034 3,034
Other liabilities 7,993 14,381 14,381 14,381 14,381 14,381 14,381
Total Liabilities 758,309 759,192 818,513 880,527 958,189 1,042,752 1,141,112
Shareholders’ equity
Share capital
Issued and paid-up share capital
ordinary shares, Baht 10 par value 23,636 23,733 23,733 23,733 23,733 23,733 23,733
Premium on ordinary shares 17,555 17,737 17,737 17,737 17,737 17,737 17,737
Appraisal surplus on asset revaluation 8,762 10,024 10,024 10,024 10,024 10,024 10,024
Revaluation (deficit) on investments 952 -529 -529 -529 -529 -529 -529
Retained earnings
Appropriated
Legal reserve 770 1,470 1,470 1,470 1,470 1,470 1,470
Unappropriated 14,672 25,679 39,617 54,833 71,123 89,450 110,985
Shareholders’ equity before minority interest. 66,347 78,114 92,052 107,268 123,558 141,885 163,420
Minority interests 318 2 2 2 2 2 2
Total Shareholders’ Equity 66,665 78,116 92,054 107,270 123,560 141,887 163,422
Total Liabilities and Shareholders’ Equity 824,974 837,308 910,567 987,797 1,081,749 1,184,640 1,304,534
Thammasat
KasikornBank Group Consulting
Income Statement/1
Thammasat
KasikornBank Group Consulting
Income Statement/2
Non-interest expenses
Personnel expenses 6,564 7,841 8,541 9,358 10,296 11,462 12,701
Premises and equipment expenses 3,814 3,525 4,991 5,680 7,406 8,760 8,850
Taxes and duties 1,386 1,677 1,827 2,001 2,202 2,451 2,716
Fees and service expenses 3,210 2,968 3,316 3,725 4,196 4,782 5,412
Directors’ remuneration 55 72 72 72 72 72 72
Loss on impairment of properties foreclosed 705 201 201 201 201 201 201
Incremental Recommendation Expense 700 1,150 970 770 660
Contributions to Financial Institutions Development Fund 2,802 2,826 2,826 2,826 2,826 2,826 2,826
Other expenses 1,311 2,316 2,316 2,316 2,316 2,316 2,316
Total Non-interest Expenses 19,847 21,426 24,790 27,329 30,486 33,640 35,755
Income before income tax 15,508 17,997 18,007 19,651 21,033 23,652 27,777
Income tax expense 116 4,003 4,005 4,371 4,678 5,261 6,178
Net income before minority interests 15,392 13,994 14,002 15,280 16,355 18,391 21,598
Minority interests in net income -52 -64 -64 -64 -64 -64 -64
Net income 15,340 13,930 13,938 15,216 16,291 18,327 21,534
Thammasat
KasikornBank Group Consulting
Fee Income Breakdown - 2005
Gain (Loss) on foreign exchanges 8442 10.93% • The items that directly
Money Transfers and Collection 8420 10.91% related to end consumers
ATM Cards and other e-banking service 7593 9.83% are ATM and Credit Cards.
Credit cards 7246 9.38% Which contribute about
Acceptances, aval, and guarantees 3252 4.21% 20% of the total fee income
• The other items excluding
Management fee 3040 3.94%
others, are mostly stem
Letters of credits 2082 2.70% from business services
Cheque-related fee 1239 1.60% (accounted for about 36%).
Underwriting 693 0.90%
Consultancy 420 0.54%
Securities custodian 414 0.54%
Other fee and services 8561 11.09%
Other non-interest incomes 25809 33.43%
Total Non-Interest income 77212
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KasikornBank Group Consulting
Assumptions
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KasikornBank Group Consulting
Ratios
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KasikornBank Group Consulting
Cost Estimation Justification
• The capital expense items are quite difficult to trace back directly to our
recommendations, but they’re required to support the growth resulting from our
recommendation none the less.
• This is the expenses item that are in different amount depending on which phase
they’re on (in Millions of Baht)
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KasikornBank Group Consulting
Financing Options Justification
• In order to support the capital expense and the on-going operation, external
financing is needed.
• Long-Term obligation
• Not just long-term debt, also include hire-purchase contract, leasing
contract, etc.
• Used mainly to financed the capital expenditure.
• Borrowing timing:
2006 2007 2008 2009 2010
12,464 8,330 14,064 16,653 16,222
• Short – Term Debt Instrument
• Used mainly for short-term financing of the asset to carry on the normal
operation
• Borrowing Timing:
2006 2007 2008 2009 2010
5,814 2,927 5,408 1,187 14,580
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KasikornBank Group Consulting
Return on Investment Justification
• PV of Inflows = 71,647 Mn B
• PV of Outflows = 36,503 Mn B
• NPV = 35,144 MnB
• Profitability Index = 1.96
• Pay back Period = 2.86 Years
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KasikornBank Group Consulting
Revenue Breakdown – KBANK Historical
2005 % 2004 %
Interest and dividend income 38,066 75.58% 32,999 73.09%
1. Loans 31,628 62.79% 27,712 61.38%
2. Interbank and MMI 2,387 4.74% 1,527 3.38%
3. Investments 4,051 8.04% 3,760 8.33%
Non-Interest Income 12,302 24.42% 12,149 26.91%
1. Fee and Service Income 9,342 18.55% 8,108 17.96%
2. Gains on Exchange 1,129 2.24% 1,806 4.00%
3. Other Income 1,831 3.64% 2,235 4.95%
Total Income 50,368 45,148
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KasikornBank Group Consulting
Intense Competition
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KasikornBank Group Consulting