KBank ‘assets’ itself with new ventures amid rising NPLs

Kasikornbank (KBank) is shaking things up and eyeing new profits by tackling its bad assets head-on via joint venture asset management companies (JV-AMCs), as non-performing loans (NPLs) climb higher across the banking scene.

Rungruang Sukkirdkijpiboon, KBank’s co-President, spilt the beans that the bank is launching a fresh JV-AMC in partnership with Bangkok Commercial Asset Management (BAM), adding to its current JV, JK AMC. The goal? To rake in new income streams and boost the bank’s bottom line.

“We’re banking on the bad asset management business to boost our revenues as NPLs soar. Partnering with seasoned pros in this arena lets us tap into untapped profits.”

As Thailand’s third-largest lender by total assets, KBank has been running JK AMC through its subsidiary, Kasikorn Vision, teaming up with JMT Network Services since 2022. They’re now just waiting for the Bank of Thailand’s thumbs-up for a business licence to kick off the second JV-AMC with BAM.

BAM, the big cheese among AMCs, manages a whopping 500 billion baht in bad assets, specialising in secured bad loans with firm collateral. Meanwhile, JMT plays the field with consumer and unsecured debt management.

Rungruang mentioned that these JV-AMCs offer KBank the edge to handle distressed assets like seasoned pros. But he made it clear—offloading KBank’s bad debts isn’t the main gig. Any sale of distressed assets follows the standard procedure used with other AMCs.

“KBank is keeping its distressed assets in check through its internal bad asset management squad. We’re staying ahead of the curve, keeping our NPLs in a sweet spot.”

As of June 2023, KBank proudly holds a gross NPL ratio of 3.18%, comfortably under its year-end ceiling of 3.25%. With a credit cost pegged at 189 basis points, it’s right on target, swinging between 175-195 basis points for the year.

Recently, KBank and BAM broke the news to the Stock Exchange of Thailand about rolling out a JV-AMC, packing a registered capital of 25 million baht, with each holding an equal 50% stake.

Rungruang hinted that this move aligns nicely with the central bank’s strategy, hatched during the pandemic in 2022, to keep the banking sector’s NPLs in check.

Last month, the central bank signed off on a business licence for ARI Asset Management Co (ARI-AMC), a JV-AMC born from BAM and Government Savings Bank. BAM is shifting about 130,000 NPL accounts, totalling 11 billion baht, to the new venture, reported Bangkok Post.