KBank steps in with B4.6bn buyback as shares sink

Kasikornbank (KBank) has launched a hefty 4.6-billion-baht share buyback to shore up share prices that have slid more than 10% in less than a month.

The bank’s board approved repurchasing up to 23.9 million shares, representing 1% of the total issued shares, for the 10 trading days between Feb 14 and 27, said Banthoon Lamsam, chairman of the board.

The buying price is not to exceed 15% of the average closing price for five consecutive days before the buyback.

Internal cash flow will be used to fund the share repurchase, he said.

After the share buyback’s announcement, KBank’s shares swung back to close higher at 141.50 baht from an early loss.

Turnover was brisk at 3.39 billion baht.

The share buyback will lower the bank’s liquid assets and book value of shareholders’ equity, allowing KBank to efficiently manage excessive liquidity and capital that is expected to result in an increase on returns on equity and earnings per share.

The bank’s capital adequacy ratio at 19.6% of risk-weighted assets is solid enough to support the pursuit of this strategy and the bank’s financial liquidity is also sufficient, with accumulated unpaid profit of 299 billion baht.

KBank’s board could consider divesting of treasury stock in the future, depending on relevant factors at that time, said Mr Banthoon.

According to regulations, treasury stock can be retired between six months and three years after shares are repurchased.

The bank’s board also approved an interim dividend payment of 4.50 baht per share for second half earnings. The dividend will be payable on April 30.

KBank has also slashed its foreign exchange rates across currencies in an attempt to manage costs after they increased from holding a surfeit of foreign currencies, said co-president Kattiya Indaravijaya.

The foreign exchange rate cut could spark a price war in the currency exchange business.

The bank faces an imbalance in stock between foreign currencies and the baht for foreign exchange business, mainly because of higher inbound tourists than outbound travellers.

Foreign tourist arrivals number around 40 million, while outbound tourists average 10 million.

The bank manages surplus foreign currencies through foreign currency deposits at offshore financial institutions, but fee charges have almost wiped out returns, she said.

KBank’s senior executive vice-president Wirawat Panthawangkun said the bank’s total transaction value from foreign exchange business amounts to 41 billion baht and the target for this year is 60 billion.

The foreign exchange rate cut is a key strategy to boost transaction value, he said.

Apart from stock and cost management, the move will generate higher income for the bank.

Mr Wirawat said estimating the effect of the coronavirus would be premature and the bank is maintaining its business target amid the outbreak.

KBank offers foreign exchange services for 28 currencies. The six currencies with the highest transactions are the US dollar, the yen, the euro, the yuan, the South Korea won and the Singapore dollar.

Superrich International Exchange’s president Piya Tantivachayanon said KBank’s foreign exchange rate cut will disrupt the money changer business significantly.

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The foreign exchange rate cut is a key strategy to boost transaction value. WIRAWAT PANTHAWANGKUN Senior executive vicepresident, KBank