BAY to increase IT, staff spending

DARANA CHUDASRI

Bank of Ayudhya, with its new partner GE, hopes to become Thailand's ''most admired universal bank'' and generate a 20% return on equity by the year 2010. Tan Kong Khoon, the BAY president and chief executive officer, told shareholders yesterday that the bank would adopt a ''service-led'' strategy.

''We will increase our investment on IT and staff training, especially sales staffs, by double compared with last year,'' he said.

Mr Tan ruled out any early retirement programme, saying that the bank's staff was ''one of two significant resources'' in addition to the bank's capital base that would help drive future growth.

At the end of the first quarter, BAY had a capital adequacy ratio of 17.45%, of which tier-one capital was 13.2%. The Bank of Thailand requires banks to maintain a ratio of 8.5%, with at least half tier-one capital.

The bank increased its capital base significantly after the US financial-services group GE took a nearly 25% stake in BAY in a 22-billion-baht deal in January.

Mr Tan said the bank was targeting net loan growth of 42 billion baht, or 9.3%, this year. Growth for the entire group, including subsidiaries in insurance and asset management, is targeted at 52 billion baht, or 13%.

Corporate lending and small business lending are projected to show 6.5% growth each this year, with retail lending at 20% net growth.

''We expect that there will be more intense competition in retail banking among the large banks. The competition also helps push our market growth,'' Mr Tan said.

Net interest margins, which stood at 3.07% at the end of 2006, are expected to improve slightly this year due to wider spreads from retail lending.

Mr Tan also said that the bank hoped to reduce non-performing loans to under 43 billion baht by the end of the year. Bad loans at the end of March totalled 46.4 billion baht, and 43.6 billion at the end of 2006.

Bad loans rose in the first quarter and were mostly to small and medium-sized borrowers, reflecting a slowdown in debt workouts.

Janice Van Ekeren, the bank's chief financial officer, said GE had sent a team of experts in risk management to help the bank meet its restructuring targets and improve asset quality.

For the first quarter of 2007, the bank booked 2.6 billion baht in profits before provisions and tax, with non-interest income up 40% and net loan growth of four billion baht for the quarter.

Net profit totalled 1.2 billion baht, compared with 1.79 billion the same period last year.

The bank's cost-to-income ratio for the first three months decreased to 58.8%, down from 62.8% at the end of last year. However, the bank expected that the ratio will increase to 60% by the end of the year due to higher investments in staff training and IT.

Shares of BAY closed yesterday on the Stock Exchange of Thailand at 21.30 baht, up 10 satang, in trade worth 182.51 million baht.

Bangkok Post

Last Updated : Saturday April 21, 2007