Kasikornbank (KBank) will require additional reserves for loan losses through the third quarter in line with rising non-performing loans (NPLs) caused by the sluggish economic recovery.
President Teeranun Srihong said the higher NPLs and loan-loss provisions were still in line with the bank's expectations as it foresees tougher economic circumstances.
"We expect to maintain the existing NPL ratio at 2.8% by the end of this year and still make our profit target, mainly supported by positive growth in fee-based income," he said.
In the first quarter, KBank's bad loans rose by 39.6% to 52.99 billion baht, while loan-loss reserves were 11.29%, up 181.83% from a year ago. On a quarter-on-quarter basis, its NPLs increased by 99.92%, while provisions rose by 27.94%. Net profit was 9.64 billion baht, down 22.22% year-on-year.
However, the bank still maintains its Thai economic growth projection at around 3% this year and expects to see an improvement in the second half.
"If the economy is going well as we hope, we can keep loan growth targeted earlier in the range of 4% to 5% this year," Mr Teeranun said.
Chief executive Banthoon Lamsam said rate cuts in the banking industry, including at KBank, would ease the financial burden of borrowers rather than spurring economic growth.
"The rate cuts will also partly support business operators in a difficult situation," he said.
KBank, the country's fourth-largest lender by assets, has cut lending rates across the board, including its minimum lending rate, minimum overdraft rate and minimum retail rate, by 25 basis points each. The bank's deposit rates have been maintained.
Separately, the bank launched a new subsidiary, Kasikorn Business-Technology Group (KBTG), yesterday after entering a partnership with financial technology firms and start-ups to explore financial innovations. It is aimed at enhancing competitiveness. KBTG will act as a software developer.
Mr Banthoon said the value of KBank's digital banking transactions surged from 900 billion baht in 2011 to around 4 trillion baht in 2015. It projects such transactions will rise to 30 trillion baht by 2020.
The bank's digital banking transactions via mobile phone and the internet increased from 168 million in 2011 to 1.13 billion in 2015.
Even though transactions at branches increased from 166 million in 2011 to 188 million in 2015, they are expected to decline to 153 million by 2020.