KT Zmico Securities expects a sharp drop in net profit this year as a result of setting aside full loan-loss provisions worth 120 million baht for its margin loans provided to financially beleaguered Energy Earth Corporation Plc.
As a subsidiary of Krungthai Bank (KTB), KT Zmico has been affected by Energy Earth's debt default, but the company hopes to recover a 70% debt repayment through the legal process, said Chaipatr Srivisarvacha, chief executive of KT Zmico Securities.
He said the company has used stricter criteria on providing margin loans for equities trading the past two to three years because of the domestic economic slowdown, which could fuel further increases in non-performing loans.
"As the parent company got hurt, so did the subsidiary in this instance. We will lose 120 million baht from the Energy Earth provision this year," Mr Chaipatr said.
Energy Earth fell into financial trouble after it failed to redeem two lots of bills of exchange (B/Es) worth a combined 90 million baht due in early June, saying the company's cash had been squeezed after its bank creditor halted its overdraft line of credit.
Its financial problems snowballed when a raft of its B/Es defaulted, triggering cross-default debentures worth 5.5 billion baht, compounded with its failure to seek fresh sources of funding from financial institutions.
Besides an anticipated fall in net profit, the company expects market trading value to decline because of the Stock Exchange of Thailand's lower earnings growth compared with that of regional indices, said Mr Chaipatr.
KT Zmico Securities has some 70,000-80,000 trading accounts, with 25% of those active in trading, he said. New accounts have increased about 5-7% per year.
In related news, KT Zmico Securities yesterday launched Setscope, an algorithm trading tool aimed at helping investors screen stocks together with robotic investment advisory.
"We applied a Thailand 4.0 policy by integrating financial technology [fintech] into our operations strategy," he said.
"Our newly established artificial intelligence [AI] lab aims to push the firm to become the top broker in terms of investment technology."
Mr Chaipatr said KT Zmico Securities recently established its own AI lab and partnered with a leading fintech firm, Setscope, to enter into securities, finance and fund management businesses.
Setscope is a popular investment platform serving some 57,000 users in Thailand, with user numbers continuing to increase this year.
The developer expects Setscope to become a total software solution that offers insightful stock analyses and assists investors in making better decisions in real-world situations, Mr Chaipatr said.
He said the partnership also supports the company's business expansion plan into neighbouring countries, namely Cambodia, Laos, Myanmar and Vietnam.
