TRIS Rating Co., Ltd. has affirmed the ratings of Krungthai Card PLC (KTC) and its Bt5,000 million senior debentures (KTC064A) at "A-". At the same time, TRIS Rating has assigned the ratings of "A-" to KTC's proposed issue of Bt4,000 million and Bt1,000 million senior debentures. The ratings reflect KTC's sustainable position as the market leader in the credit card business and the strong support it receives from its major shareholder, Krung Thai Bank PLC (KTB). The ratings also reflect KTC's management capabilities and efficient operational and risk management systems. However, these strengths are partially offset by intense competition from bank and non-bank credit card operators and development of a more rigorous regulatory regime. Moreover, if KTC continues its aggressive expansion, KTC has to prudently manage its financial liquidity since the company must preserve its financial flexibility for business growth.
TRIS Rating reported that KTC was formerly a wholly-owned subsidiary of KTB. From 1996 through June 2002, KTC operated only a credit card service management business for KTB without holding any assets and liabilities from those credit cards. Although privatized and listed on the Stock Exchange of Thailand in 2002, KTC continues to receive strong financial and marketing support from KTB. KTC received a Bt13,030 million credit line from KTB at the end of 2003. However, to support its future expansion, KTC plans to diversify its sources of funding, intending to maintain KTB's line as the last resort. After KTC was spun off from KTB, the company used an aggressive marketing strategy to expand its portfolio, including offering lifetime free memberships. The number of credit cards increased from 171,266 cards in 2001 to 598,173 cards in 2002 and to 785,107 cards in 2003. KTC's credit card market share increased from 7% of total bank credit cards in 2001 to 17.6% in 2002 and to 17.7% in 2003. As of December 2003, KTC had Bt11,173 million of net credit card receivables, which accounted for 78.1% of Bt14,297 million in total assets. In 2003, KTC earned 51.5% of its revenue from interest income, up from 42.3% in 2002.
TRIS Rating said the average card usage or spending rate per card per month decreased from Bt5,113 in 2002 to Bt4,088 in 2003 because many cardholders own more than one credit card. Nonetheless, because of the increasing numbers of credit cards outstanding, KTC's total card usage increased from Bt14,885 million in 2002 to Bt26,087 million in 2003. In addition, the revolving rate of KTC's customers rose from 71.8% of customer spending in 2002 to 78.6% of customer spending in 2003. KTC had Bt245 million of adjusted net profit (excluding Bt108 million of income from bad debt recovery) in 2003 compared to Bt134 million (excluding Bt7 million of income from bad debt recovery)in 2002. In late 2003, KTC diversified into personal loans. Beginning in 2004, KTC management expects its personal loan business to be another major business. The customer purchase rate (spending per month divided by previous month accounts receivable outstanding) is slightly higher than the customer payment rate (monthly principal and interest payment divided by previous month accounts receivable outstanding). As a result, the company must prudently manage its liquidity to balance its cash flow. Although KTC's delinquency ratio for payments greater than 180 days past due increased from 0.7% in 2002 to 1.0% in 2003, it is at an acceptable level. To finance the future growth of accounts receivable, KTC plans to fund its expansion using diverse sources of funds, including a credit line from KTB and a debenture issue.
Since the financial crisis in 1997-1999, the regulatory authorities have implemented various new regulations to protect consumers and stabilize the financial system. In March 2004, the Bank of Thailand prepared to implement a new regulation raising the minimum installment payment from 5% to 10% of total debt. Also, the maximum credit card receivable on each account will not be allowed to be greater than five times each customer's base salary. The revenue stream of credit card operators might be affected by these regulations, TRIS Rating said. -- End
Krungthai Card PLC (KTC)Company Rating: Affirmed at A- Issue Ratings:KTC064A Bt5,000 million senior debentures due 2006 Affirmed at A-Bt4,000 million senior debentures due 2007 A-Bt1,000 million senior debentures due 2009 A-
TRIS Rating reported that KTC was formerly a wholly-owned subsidiary of KTB. From 1996 through June 2002, KTC operated only a credit card service management business for KTB without holding any assets and liabilities from those credit cards. Although privatized and listed on the Stock Exchange of Thailand in 2002, KTC continues to receive strong financial and marketing support from KTB. KTC received a Bt13,030 million credit line from KTB at the end of 2003. However, to support its future expansion, KTC plans to diversify its sources of funding, intending to maintain KTB's line as the last resort. After KTC was spun off from KTB, the company used an aggressive marketing strategy to expand its portfolio, including offering lifetime free memberships. The number of credit cards increased from 171,266 cards in 2001 to 598,173 cards in 2002 and to 785,107 cards in 2003. KTC's credit card market share increased from 7% of total bank credit cards in 2001 to 17.6% in 2002 and to 17.7% in 2003. As of December 2003, KTC had Bt11,173 million of net credit card receivables, which accounted for 78.1% of Bt14,297 million in total assets. In 2003, KTC earned 51.5% of its revenue from interest income, up from 42.3% in 2002.
TRIS Rating said the average card usage or spending rate per card per month decreased from Bt5,113 in 2002 to Bt4,088 in 2003 because many cardholders own more than one credit card. Nonetheless, because of the increasing numbers of credit cards outstanding, KTC's total card usage increased from Bt14,885 million in 2002 to Bt26,087 million in 2003. In addition, the revolving rate of KTC's customers rose from 71.8% of customer spending in 2002 to 78.6% of customer spending in 2003. KTC had Bt245 million of adjusted net profit (excluding Bt108 million of income from bad debt recovery) in 2003 compared to Bt134 million (excluding Bt7 million of income from bad debt recovery)in 2002. In late 2003, KTC diversified into personal loans. Beginning in 2004, KTC management expects its personal loan business to be another major business. The customer purchase rate (spending per month divided by previous month accounts receivable outstanding) is slightly higher than the customer payment rate (monthly principal and interest payment divided by previous month accounts receivable outstanding). As a result, the company must prudently manage its liquidity to balance its cash flow. Although KTC's delinquency ratio for payments greater than 180 days past due increased from 0.7% in 2002 to 1.0% in 2003, it is at an acceptable level. To finance the future growth of accounts receivable, KTC plans to fund its expansion using diverse sources of funds, including a credit line from KTB and a debenture issue.
Since the financial crisis in 1997-1999, the regulatory authorities have implemented various new regulations to protect consumers and stabilize the financial system. In March 2004, the Bank of Thailand prepared to implement a new regulation raising the minimum installment payment from 5% to 10% of total debt. Also, the maximum credit card receivable on each account will not be allowed to be greater than five times each customer's base salary. The revenue stream of credit card operators might be affected by these regulations, TRIS Rating said. -- End
Krungthai Card PLC (KTC)Company Rating: Affirmed at A- Issue Ratings:KTC064A Bt5,000 million senior debentures due 2006 Affirmed at A-Bt4,000 million senior debentures due 2007 A-Bt1,000 million senior debentures due 2009 A-