Krungthai Bank (KTB) is looking to raise its minimum retail rate (MRR) to be on par with industry peers if necessary to maintain profitability this year, while permanent secretary for finance Prasong Poontaneat believes the central bank will pause policy rate hikes this year.
"If needed to maintain net interest margin [NIM] and profit, we could raise the MRR," said KTB president Payong Srivanich.
"Appropriate timing depends on loan demand and the bank's liquidity. It has nothing to do with the general election or the new government."
KTB, the country's largest state-owned bank and the fourth largest bank by assets, and Kasikornbank charge the industry's lowest MRR at 7.12%. In comparison, Bangkok Bank's MRR stands at 7.125% and Siam Commercial Bank is at 7.37%.
For 2018, KTB's NIM was 3.23% with a recorded a net profit of 28.5 billion baht.
Mr Payong said the bank wants to increase both interest and non-interest income this year to maintain profitability.
Based on KTB's MRR, which is 0.25 percentage point below its rival peers on average, the bank's interest income would be 1 billion baht lower than others for every 400 billion baht in its loan portfolio.
The bank targets 5% lending growth in 2019, assuming GDP growth of 4.1%.
Retail loans, targeted to expand 6-7%, and small and medium-sized enterprise (SME) loans are expected to be the main contributors to the bank's total loan growth.
KTB will slow down government loan extension this year, in line with lower demand and yields for the business segment.
He said the bank aims for 2.5% growth in non-interest income this year, despite the decline in transactional banking fees following the waivers on the digital transaction fee.
Other fee-based income sources, particularly in bancassurance, are expected to help the bank achieve the target.
The bank aims to increase user numbers for mobile banking app Krungthai NEXT to 10 million by the end of the year from 4.5 million.
KTB has set an IT investment budget for 2019-22 at 19 billion baht, of which 12 billion baht is expected to be spent this year. Even while going digital, an omni-channel strategy is required, said Mr Payong.
In the next two years, the bank's branch numbers will be downsized to around 1,000 nationwide from 1,100, and branch staff numbers will be reduced by 30% from 21,000 employees, he said.
In related news, Mr Prasong said the Finance Ministry believes the Bank of Thailand understands the impacts of the policy rate increase on SMEs and grassroots people, even though two Monetary Policy Committee's (MPC) members voted for a 25-basis point hike at this month's meeting.
The MPC voted 4-2 to maintain the policy rate at 1.75% on Feb 6, pointing to rising anxiety over swelling household debt after it lifted the rate by a quarter point in last December. Two members voted to raise the policy rate by 0.25 percentage points from 1.75% to 2%, while one member was absent.
It is necessary to help SME operators, salaried workers and low-income earners who have debt to service, and the interest rate increase would harm these groups, he said.
Mr Prasong said the ministry has been monitoring the baht's strength for a while, but this is the central bank's responsibility.
The stronger baht could be attributed to the country's current account surplus, he said.
The baht is the best performing currency in Asia, gaining almost 4% against the US dollar this year.
