KBank cuts non-interest income target
Bank foresees fee-cut trend effects for 2018
Kasikornbank (KBank), which has the country’s most popular mobile banking app, has slashed its non-interest income growth target this year to a contraction of 6-8% after the bank jumped on the fee-cut bandwagon for online transactions.
The bank’s board of directors revised KBank’s non-interest income growth target for this year based on current conditions, the bank said in a filing to the Stock Exchange of Thailand (SET) yesterday.
Last October KBank projected flat growth for 2018 non-interest income.
KBank’s consolidated non-interest income of 62.7 billion baht last year was a dip of 1.03 billion, or down from 63.7 billion in the previous year.
KBank and its subsidiaries’ non-interest income accounted for 40% of total income in 2017 and 41.5% in 2016.
But the bank is maintaining other targets — a net interest margin at 3.2-3.4%, lending growth of 5-7%, a cost-to-income ratio in the mid-40s, credit costs per year at 185 basis points and a 3.3-3.4% nonperforming loan ratio.
KBank followed in Siam Commercial Bank’s footsteps by eliminating its digital transaction fees for inter-bank and crossclearing zone fund transfers, bill payment and top-ups, effective from
March 28, with the aim of raising the number of its mobile and internet banking users as technology giants are disrupting retail banking business.
As of March 25, KPlus — a mobile app for retail customers — had 8.1 million users with transaction value of 6.3 trillion baht a year. K-Cyber banking had 1.7 million users with transaction value of 1.7 trillion baht a year. K Plus SME had 440,000 users with transaction value of 200 billion baht a year and K Cyber SME had 43,000 users with value of 400 billion.
The bank’s president, Kattiya Indaravijaya, said an additional 20,000 customers have downloaded the K Plus app since fees were eliminated for the digital channel.
KBank has no plans to cut fees for other banking channels, especially ATMs, because it wants to migrate conventional transactions to the digital platform to cut costs of cash transactions, she said.
Ms Kattiya said the no-fee scheme is expected to facilitate digital business growth in terms of users, transactions, and volume.
ATM transactions are forecast to gradually decline in the long term.
With these assumptions, the bank is not investing more in armoured cars or cash management, opting to outsource these services to cut operating costs, she said.
“We expect the smaller fee-based income will be offset by lower operating costs in the mid-term,” said Ms Kattiya.
Banthoon Lamsam, the bank’s chief executive and chairman, said the expected decline in non-interest income growth is in line with the market and changing technology, but the bank will search for new business areas to compensate for the foregone income.
KBANK shares closed yesterday on the SET at 195.50 baht, down 16.50 baht, in heavy trade worth 5 billion baht.