TRIS Rating Co., Ltd. has affirmed the ratings of Krungthai Card PLC (KTC) and its senior debentures at "A-" with "positive" outlook. At the same time, TRIS Rating has assigned the rating of "A-" to KTC's proposed issue of up to Bt3,000 million senior debentures. The ratings reflect KTC's strong market position 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 constrained by intense competition from bank and non-bank credit card operators and development of a more rigorous regulatory regime.
The "positive" outlook reflects the expectation that KTC will be able to maintain its leading position in the credit card business and sustain acceptable credit quality of its growing portfolio. KTC's marketing campaigns have been successful in expanding its new customer base and boosting card utilization. As the business continues to grow under growing economic environment with the guidance of a creative management team, the company has been able to maintain acceptable credit quality and provisioning policy. A new product, personal loans, was successfully launched in 2003 and is expected to have further improvement in its performance. In September 2004, the company introduced another new product called self-employed loans (loans for micro entrepreneurs). It will take some time after the product launch to prove that the new product adds to KTC's winning strategy.
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. Since KTC's spin-off in July 2002, KTB had provided the company with a series of credit lines, which amounted to Bt13,030 million by the end of October 2003. As of September 2004, the outstanding credit lines are still maintained at such level; however, KTC has utilized other sources of fund to support business expansion and retains KTB's lines as the last resort. Currently, KTC's outstanding borrowing from KTB is only Bt600 million of the total credit line received from KTB. In November 2003, KTC made a rights offering to increase its registered capital from Bt1,050 million to Bt2,580.2 million, which helped improve its financial leverage.
TRIS Rating said after KTC was spun off from KTB, the company used aggressive marketing strategies 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, to 785,107 cards in 2003 and to 1,001,420 cards as of September 2004. KTC's credit card market share increased from 7% of total bank credit cards in 2001 to 17.6% in 2002 and 17.7% in 2003. As of September 2004 the company's market share had dropped to 12.2% despite continuous growth in the number of cards because the Bank of Thailand expanded the definition to cover non-bank card issuers and including private label cards and cash cards, which resulted in a larger total base of credit cards this year. As of September 2004, KTC had Bt12,846 million of net credit card receivables, increased from Bt11,173 million at the end of December 2003, which accounted for 67.7% and 78.4% of total assets, respectively. Meanwhile, as of September 2004, KTC's personal loan business had receivables of Bt3,596 million or 18.9% of its total assets.
The average card usage (spending rate per card per month) decreased from Bt5,113 in 2002 to Bt4,088 in 2003 and to Bt3,528 as of September 2004 because many cardholders own more than one credit card. Nonetheless, the revolving rate of KTC's customers rose from 71.8% of customer spending in 2002 to 78.6% in 2003 and 79.7% as of September 2004. KTC had Bt454 million of net profit for the nine months ended September 2004 compared with Bt353 million for the whole year of 2003. KTC's customer purchase rate (spending per month divided by previous month accounts receivable outstanding) as of September 2004 was close to the customer payment rate (monthly principal and interest payment divided by previous month accounts receivable outstanding), which helped improve the company's liquidity, 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- KTC074A: Bt1,500 million senior debentures due 2007 Affirmed at A- Bt1,000 million senior debentures due 2007 Affirmed at A- Bt1,000 million senior debentures due 2009 Affirmed at A- Bt210 million senior debentures due 2006 Affirmed at A- Up to Bt3,000 million senior debentures due 2008 A- Rating Outlook: Positive from Stable