Kiatnakin Bank (kk) - New Bank Opens Its Doors

[george]

New bank opens its doors

High rates offered to attract deposits

BANGKOK:- Kiatnakin Bank (KK), the country's newest commercial bank will begin operations today, with a strategy to offer high deposit rates to attract long-term savings.

The bank, formerly Kiatnakin Finance Plc, one of a number of finance and credit foncier companies given approval to upgrade to full-service or retail banks, is now offering offering 4% interest for four-year fixed deposits, 25-50 basis points higher than what other banks offer.

Thitinan Wattanavekin, head of treasury and funding at KK Bank, said the strategy would have minimal risks from the mismatching of funds between deposits and loans.

Currently, half of the bank's loan portfolio, which stood at 34 billion baht at the finance company last year, is made up of hire-purchase, real estate and home loans and another 25% consists of commercial and SME loans while as of June 30, Kiatnakin Finance had total deposits of 47 billion baht.

According to Ms Thitinan, KK Bank has seven billion baht worth of promissory notes outstanding, which investors can either swap into fixed accounts at the bank at the same interest rate or hold until they expire. The bank plans to boost its deposit size to 84 billion baht by 2007.

``We now have 6,000 deposit accounts, of which a half have been with us for five to 10 years. With such high strong customer loyalty, it we position ourselves properly, we can compete with other banks, but we won't do that at the moment when everybody is seriously fighting in the area of retail banking,'' Ms Thitinan explained.

The bank has its head office in the Amarin Tower. It plans to open 15 branches next year, through the conversion of representative offices of Kiatnakin Finance and by the end of 2007, it is targeting to have 43 branches.

``We won't open a lot of branches in the first few years because we want to focus on certain groups of customers, in both the deposit and lending areas,'' Ms Thitinan said.

The bank aims to have 10 million fixed deposit accounts while on the lending side, it will focus on three segments _ auto hire-purchase, real estate and SMEs.

``KK Bank will be a small bank offering special services for clients, who don't like to wait in long queues but prefer to spend as little time as possible while doing bank transactions,'' Ms Thitinan said.

It will maintain the the A- credit rating of Kiatnakin Finance, which enables it to access funds cheaply, but in the long run, the bank will work to reduce its exposure risks to prepare for times of uncertainty.

Conditions have changed a lot for KK since the 1997 economic crisis when it had to pay interest rates that were 400-500 basis point above the minimum lending rates, due to tight liquidity in the market.

``We had to adjust to the market environment. We are one of the two finance companies that survived the economic crisis, so we have learned a lot and know how to stay afloat. We run our business conservatively,'' Ms Thitinan said.

Tawatchai Sudtikitpisan, the bank's president, said despite its small size, KK was in a very strong financial position, as indicated by its BIS ratio of 24%, which is much higher than the Bank of Thailand requirement of 8.5%.

The BIS ratio measures total capital against total assets. The higher the ratio, the more protection a bank has against operating losses.

He said KK aimed to expand at least 20% annually in terms of asset size to 100 billion baht in total assets in 2007. As of December 2004, KK had total assets of 58 billion.

The bank also plans to boost its loan portfolio to 90 billion baht by 2007 from 34 billion baht last year.

Banking operations are expected to account for 70% of KK's revenues while 20% will come from investments and the rest from the bank's securities business.

A research report from SCB Securities said there would be little change in direction between Kiatnakin Finance and KK Bank with the operation's main focus to be centred on its niche market of auto hire-purchase, residential project loans and distress asset management.

``We don't believe the plan to have 84 billion baht in retail savings over the next three years will ease funding costs to any discernible extent, as we expect KK Bank will look for long-term deposits rather than short-term ones and have to offer high interest rates to attract depositors,'' the report said.

With its limited branch network, the bank will find it difficult to compete with other banks for deposits, it added.

KK had a net profit of 1.13 billion baht for the first half of 2005, down from 1.21 billion baht in the same period last year.

Shares of KK on Friday closed unchanged at 31.25 baht in trade worth 178.18 million baht.

--Bangkok Post 2005-10-03

[Scott]

Does this rate of interest apply to foreigners living in the Kingdom?