KBank Subsidiaries and ASEAN Economic Strategy

K KASIKORNTHAI ธนาคารกสิกรไทย 开泰银行 KASIKORNBANK TFRS 9: Implications for Thai Banking business (Effective: January 1, 2020) Financial Impacts High Moderate ΜΟΤ Impacts on Thai banking business can be classified into four key areas, each with its own financial impacts to net profit (high, moderate, and low) Key Areas Expected Credit Loss & Modification New definition of SICR and modified loans Changes in provision: from "1-year Expected Credit Loss" per BOT guidelines to "Lifetime Expected Credit Loss"; also, additional base of unused credit line and guarantee Assets Classification ■ Instrument at cost -> fair value: investment in non-listed equities will turn from "at cost" to "at fair value through PL" or "at fair value through OCI" depending on business model ■ AFS instrument -> fair value through PL: Generally, AFS instrument will be fair value through OCI, only for some product features will be "fair value through PL" Effective Interest Rate " Upfront fee -> interest accrual: credit fee income will turn from "Cash basis" to "Interest income on amortization basis" ■ Future step rate: averaged over behavioral lifetime and recognized upfront as fixed rate Hedge Accounting - Optional ■ Derivative at accrual -> fair value: banking book derivatives will turn from "accrual basis" per TFAC guideline to "Mark to Market" per risk offsetting basis Key Impacts Additional TFRS9 Expected Credit Loss ■ TFRS9 and current number are non-comparable ■ Non-interest income and OCI: volatile from unrealized market move Fee income and non-interest income: lower ■ Bottom line: neutral over the contractual life ■NIM: higher but more volatile PL on trading business: more volatile if derivatives are unqualified for hedge accounting and/or carry basis risk Note: SICR = Significant Increase in Credit Risk; PL = Profit and Loss; OCI = Other Comprehensive Income as part of equity; AFS = Available for Sale; TFAC = Thailand Federation of Accounting Professions who governs accounting professionals in Thailand บริการทุกระดับประทับใจ K KASIKORNTHAI ธนาคารกสิกรไทย 开泰银行 KASIKORN BANK Expected Credit Loss: Key Changes in Loan Classification Apart from days past due (DPD), risk information is used to capture credit quality. Hence, cannot directly compare with the current basis. Current: defined by days past due Pass DPD 0-30 days Special Mention DPD 31 90 days Sub-Standard Doubtful Doubtful of Loss DPD > 90 days New: TFRS 9 - defined by incremental risks (Effective: January 1, 2020) TFRS 9 Asset Class: New definition of SICR and Modified Loans ■ SICR reflects higher risk than origination, but not yet bad quality ■ Modified loans are loans with changing terms and conditions, either good or bad; thus, it can be at any stage Stage 1: Perform New or good assets Stage 2: Underperforming Assets with "> 30 days DPD" or higher credit risk than origination capturing via risk information eg. Credit scoring, PD change etc. Note: SICR = Significant Increase in Credit Risk; DPD = Days Past Due บริการทุกระดับประทับใจ Stage 3: Non-performing Defaulted assets 125 126

View entire presentation