2 10 12 16 22 28 47 72 85 92 93 94 95 187 212 213 228
244
Financial Highlights Message from Chairman of the Board of Directors Message from Chief Executive Officer Vision From Our Strategic Partner: Scotiabank Thai Economic Condition in 2008 and The Outlook for 2009 Management Discussion and Analysis of Financial Position and Performance Nature of Business Operations Risk Management and Risk Factors Corporate Social Responsibility Responsibilities of the Board of Directors for Financial Report Report of the Audit Committee Report of Indepentdent Auditor Financial Statements and Notes to Financial Statements Corporate Governance Supervision and Management Structures Board of Directors and Executives General Information Investment of Thanachart Bank in Other Companies Thanachart Bank’ s References Structure of Major Shareholders Dividend Policy Companies in Thanachart Group Branches of Thanachart Bank Related Party Transactions
VISION OF THANACHART GROUP Being a business group, with cooperation from every department, that offers fully integrated financial services with focus given on providing excellent quality of services and product development to be able to respond to every financial need of its target customer groups. NINE STRATEGIC INTENTS FOR THE BUSINESS OPERATION 2009 1. Meeting strategic financial targets The financial target has been determined suitably with the economic condition and business competition in order for the targets to be achievable with a satisfaction of the shareholders and staff. 2. Maintain market leader in Hire Purchase in every location that TBANK has presence To maintain a market leader position in Hire Purchase in every region and every type of vehicle that Thanachart Bank operates its business, together with the supervision of non-performing loans to be within the estimated limit. 3. Increase in customer accessibility In branch expansion, as at the end of 2009, Thanachart Bank targeted 255 branches, along with the development of excellent management quality. 4. Diversify business loan portfolio Adjust the financial structure of loan portfolio with enlarging the portion of other loans beside of hire purchase loan. 5. Drastic improvement in cross-selling Enhance the sale of the total financial products within Thanachart Group with the model of cross-selling by aiming on providing training to the marketing staff on financial products. 6. Increase in non-interest income Increase in non-interest income to be on par with the industry average. 7. Controlling costs and process improvement To maximize benefit from expenses and adjusting work process, in order to increase the employees’ productivity which would further improve the quality of customer service. 8. Achieving “Best-in-class” customer servicing Improving the service quality of all branches to meet with the standard that Thanachart Bank has established. 9. Brand strengthening To strengthen the brand and good image of Thanachart Group under efficient cost control. ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
financial highlights
As at and for the year ended December 31 Consolidated financial statements
2008
2007
20,688
17,488
separate financial statements
2008
2007
2006
2005
2004
Operating results (Million Baht)
Interest and dividend income
Interest expenses
9,398
19,897 17,123 15,520 5,309 2,328
9,396 9,429 9,386 9,510 2,837 1,213
Net interest and dividend income
11,290
8,092
Non-interest income
10,700
6,111 2,286 2,005 1,318 791 252
(1)
10,468 7,737 6,010 2,472 1,115
Total income
21,990
14,203
12,754 9,742 7,328 3,263 1,367
Non-interest expenses
15,535
9,905
7,788 6,105 5,744 2,295 759
(2)
Bad debt and doubtful accounts
3,968
2,692 3,548 2,606 1,254 606 57
Net income
1,870
1,327
1,304 991 225 362 551
Operating performance Basic earnings per share (Baht)
1.08
0.84
0.75
0.63
0.15
0.42
0.68
Return on average assets (ROA) (Percent)
0.56
0.47
0.41
0.36
0.10
0.27
0.84
Return on average equity (ROE) (Percent)
8.79
7.47
6.22
5.52
1.48
2.99
6.24
(3)
Interest spread
(Percent)
Cost to income ratio(4) (Percent)
3.17
2.65
3.14
2.73
2.30
1.93
1.70
70.65
69.74
61.06
62.67
78.38
70.33
55.52
Balance sheet information (Million Baht) Loans
276,142
228,776 272,925 224,940 200,652 158,697 31,023
Total assets
378,347
300,787 368,272 291,098 257,436 195,525 72,944
Deposits and short-term borrowings
317,243
248,193 318,760 248,084 214,506 149,301 45,281
Total liabilities
357,006
279,807 347,002 270,402 242,237 180,225 64,044
21,278
20,923 21,270 20,695 15,199 15,300 8,900
INTEREST SPREAD
150,000
1.93
1.70
2.30
2.00
1.50
1.00
31,023
45,281
100,000
50,000
0.50
0.00
0 2008
2.65
2.50
158,697 149,301
200,652 214,506
200,000
3.00
2.73
318,760
(Percent) 3.50
224,940 248,084
250,000
272,925
300,000
228,776 248,193
350,000
276,142 317,243
loan and deposits and short-term borrowingS (Million Baht)
3.14
Shareholders’ equity
3.17
(5)
2007
2008
2007
2006
2005
2004
Consolidated Financial Statements
Separate Financial Statements
Loans
Deposits and short-term borrowings
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
(Year)
2008
2007
Consolidated Financial Statements
2008
2007
2006
2005
Separate Financial Statements
2004
(Year)
As at and for the year ended December 31 Consolidated financial statements
2008
2007
separate financial statements
2008
2007
2006
2005
2004
Balance sheet quality Loans to deposits and short-term borrowings ratio 87.04
NPL-gross to total loans
NPL-net to total loans
Coverage ratio(6)
Total allowance to BOT regulation
Non-performing loans (NPLs) (Million Baht)
2.70
92.18
85.62
90.67
93.54
106.29
68.51
2.41
2.30
2.31
1.87
2.26
5.75
0.66
0.78
0.60
0.81
0.83
1.95
7.23
94.99
92.07
88.81
86.80
81.59
51.95
48.40
113.15
121.72
101.55
108.38
104.65
101.42
211.85
7,466
5,520 7,167 5,213 3,753 3,582 2,622
Capital measures Tier I capital ratio
8.02
10.15
8.81
15.37
22.76
Total capital ratio
11.18
12.00
11.13
17.26
26.35
Risk weighted assets (Million Baht) 252,634 197,128 175,806 100,787 38,055 Common share information
Common shares outstanding (Million shares)
- Average-basic
1,735
1,584
- End of period
1,735
1,735 1,735 1,735 1,458 1,458 810
Book value (Baht)
12.26 12.06 12.26 11.93 10.42 10.49 10.99
1,735 1,584 1,458 851 810
Dividends per share (Baht) 0.43 0.15 0.25 0.25 0.25 Other information Employees
9,630
6,210 7,534 4,603 3,978 2,645 602
Branches
Exchange booths
213
166
133
66
13
76
64
42
8
1
net income (1)
(Million Baht)
Including loss on debt restructuring
1,870
2,000
Total income = Net interest and dividend income + Non-interest income
(2) (3)
Interest spread = Yield - Cost of fund
Yield = Interest and dividend income/Average earning assets
1,800
1,400
1,304
1,327
1,600
(Earning assets = Interbank and money market from interest bearing +
securities purchased under resale agreements + net investment + loans)
Cost of fund = Interest expenses/Average paying liabilities
1,200 991
1,000
(Paying liabilities = Total deposits + interbank and money market
from interest bearing + total borrowings)
(4)
Cost to income ratio = Non-interest expenses/Total income
(5)
Excluding minority interest
800
(6)
551
Total allowance/NPLs
362
600 225
400 200 0 2008
2007
Consolidated Financial Statements
2008
2007
2006
2005
2004
(Year)
Separate Financial Statements
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
MESSAGE FROM CHAIRMAN OF THE BOARD OF DIRECTORS
MR. Banterng Tantivit Chairman of the Board of Directors Thanachart Bank Public Company Limited
In 2008, the global economy was faced with a severe problem. Many major financial institutions have requested a government bailout package, as a last resource of survival, and some were closed down.
The Thai economy, however, just began to take its share of the problem and the impact was not as severe.
The Thai financial institutions had a healthy performance and their positions were considered stable. Under the circumstance of global economic recession and high uncertainty, it is a celebrated honor when The Bank of Nova Scotia (Scotiabank) reassures its belief in the potential of the Thai economy and
of Thanachart Bank with increasing its shareholding in Thanachart Bank up to 49 percent in February 2009. Regarding the Board of Directors of Thanachart Bank, Mr. Suvit Arunanondchai and Mr. Vichit Yarnamorn, whose dutiful performances are greatly valued, respected and appreciated, have resigned from
the directorship in 2008. To fulfill the vacant positions, the Board of Directors has appointed two designated persons proposed by Scotiabank to be directors, namely, Assoc. Prof. Dr. Somjai Phagaphasvivathana,
an independent director, and Mr. Kobsak Duangdee, an executive director. Both newly appointed directors will, with out any doubt, carry out the director duty exceptionally with their superb knowledge, experience,
moral and ethic.
10
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Scotiabank, as one of the most stable banks in the world, has become a partner by holding 49 percent of Thanachart Bank’s shares and has sent top executives to participate as a director, as well as, various experienced executives to engage in the key business divisions of the Bank. This partnership has enhanced
the credibility in perspective of stability and capability in developing services for the Bank. Although the global economy turmoil is expected to deepen and the impact on the Thai economy will intensify, the Board of Directors has been closely monitoring the economic conditions both domestically and internationally. With the Bank’s Directors, we have cautiously supervised the Bank’s business operation, adjusted financial targets and strategies, aim at mitigating the adverse impact on Thanachart Bank and
all stakeholders.
As the Chairman of the Board, I would like to express my appreciation toward directors, executives, employees, shareholders and customers in their entrustment and support which drive Thanachart Bank
to today’s growth and success.
Banterng Tantivit
Chairman of the Board of Directors
Thanachart Bank Public Company Limited
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
11
MR. suphadej poonpipat Vice Chairman, Chairman of the Executive Committee and Chief Executive Officer Thanachart Bank Public Company Limited
Thanachart Bank Public Company Limited “Thanachart Bank” and the companies in Thanachart Group place an emphasis on becoming “Customer Centric” by making the customers’ need a priority, proactively developing various new products and expanding service channel. The objective is to enlarge business base and thrive for excellence in service quality which would continue to serve as a firm foundation in business operation, aim to achieve target of becoming the leading mid-size bank of the nation under the strong and sustainable growth. On the other words, growth shall be strengthened by the asset size compatible for competition and by having a financial performance on par with the average of commercial banking industry. Moreover, in the year 2008 Thanachart Bank and the companies in Thanachart Group have accomplished
the five strategic intents as follows: 1. Maintenance of market leader position in hire purchase business; 2. Diversifying loan portfolio with Thanachart Bank increasing a proportion of corporate loans which thus diversifying its credit and interest rate risks more efficiently; 3. Increasing income base contributed by interest income from loan expansion and non-interest income; 4. Providing excellent service quality to customers by applying the principle of Branch Service Best Practices to all branches; and 5. Reducing cost to income ratio to be on par with the industry average, despite the growing operating cost from installing infrastructure system.
12
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
To be able to control, monitor and measure the strategic execution and performance results systematically and effectively, Thanachart Group established the CEO’s Six-point Agenda as a tool to maneuver key operational plan of all business units of Thanachart Group. In 2008, Thanachart Group successfully executed all six agendas. The financial turmoil in the United States has adversely affected the economies of the world’s major consumers to contract severely. The Thai economy was also impacted, in both export and tourism which are the main drivers of the Thai economy. In the fourth quarter, Thailand was faced with a negative economic growth
of 4.3 percent, and thus, making the 2008 annual average growth to be as low as 2.6 percent. Nevertheless,
the performances of Thanachart Bank and the companies of Thanachart Group are considered satisfactory, which can be substantiated by the following: • In term of financial status, the total assets of Thanachart Bank and its subsidiaries increased by 25.8 percent from 300,787 million baht in 2007 to 378,347 million baht in 2008. The return on equity amounted to 8.79 percent and the return on asset amounted to 0.56 percent. In 2008, net income amounted to 1,870 million baht, an increase of 543 million baht or 40.89 percent when compared to that of last year.
This was due to the continuous business expansion of Thanachart Group and the increase of loan spread from 3.30 percent to 4.03 percent. Furthermore, life insurance and non-life insurance businesses have been growing consistently. At the same time, non-interest expenses increased by 56.85 percent, due to the business expansion, investment in information technology and infrastructure systems. Consequently, operating cost after insurance underwriting expenses amounted to 59.72 percent, a decrease from the previous year.
The customer base expanded by 30.37 percent. • In term of branch expansion in 2008, Thanachart Bank has opened 47 additional branches. Consequently, there were 213 branches in total and the Bank was ranked 8th in the commercial banking
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
13
industry. Simultaneously, the Bank expanded Automatic Teller Machine (ATM) service channel through
the business alliance “ATM CONNECT” with Krung Thai Bank Public Company Limited and Siam City Bank Public Company Limited. Thanachart Group henceforward expanded the service network in the form of
ATM nationwide. • In term of new core systems in the previous year, Thanachart Group has been progressing continuously in the new core systems installment in accordance with such plan to enhance the effectiveness of service and reduction of the operating cost per transaction. The core systems include, among others, deposit system, treasury system, trade finance system, credit card system, human resource information system and accounting system. These will enhance the operation to be more effective and efficient. On 3 February 2009, the Bank of Nova Scotia “Scotiabank” has acquired the existing ordinary shares of Thanachart Bank from Thanachart Capital Public Company Limited “Thanachart Capital” to increase its shareholding in Thanachart Bank up to 49 percent in accordance with the Shareholders Agreement.
This reassured the vision and confidence of leading Canadian bank in Thanachart Bank. Since Scotiabank became the business partner in 2007, Thanachart Bank has succeeded in integrating the corporate cultures between Scotiabank and Thanachart Group. Furthermore, Thanachart Group has achieved a new intellectual capacity regarding international business standard. Scotiabank has designated three nominees to be directors and delegated seven seconded managements in the key business units of Thanachart Group. Such seconded managements play a key role in improving the working procedure, enhancing innovation, leveraging experience and knowledge. This partnership, with an increase of Scotiabank’s shareholding, will help enhance the financial stability, capability and sustainability of Thanachart Bank’s business operation in a long-term. Business Strategy in 2009, Thanachart Group continuously aims to be Customer Centric in order to achieve target of being a leading mid-size bank of the nation. The nine strategic intents to serve such purpose are as follows: 1. Meet strategic financial targets The financial target has been determined suitably with the economic condition and business competition in order for the targets to be achievable with a satisfaction of the shareholders and staff. 2. Maintain market leader position in Hire Purchase in every location that Thanachart Bank is present To maintain a market leader position in Hire Purchase in every region and every type of vehicle that Thanachart Bank operates its business, together with the supervision of non-performing loans to be within
the estimated limit. 3. Increase in customer accessibility In branch expansion, as at the end of 2009, Thanachart Bank targeted 255 branches, along with the development of excellent management quality. 4. Diversify business loan portfolio Adjust the structure of loan portfolio by enlarging the portion of other loans beside of hire
purchase loan.
14
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
5. Drastic improvement in cross-selling Enhance the sale of the total financial products within Thanachart Group with the model of
cross-selling by aiming on providing training to the marketing staff on financial products. 6. Increase in non-interest income Increase in non-interest income to be on par with the industry average. 7. Controlling costs and process improvement To maximize benefit from expenses and adjusting work process, in order to increase the employees’ productivity which would further improve the quality of customer service. 8. Achieving “Best-In-Class” customer servicing Improving the service quality of all branches to meet with the standard that Thanachart Bank
has established. 9. Brand strengthening To strengthen the brand and good image of Thanachart Group under efficient cost control. In the past business performance, Thanachart Bank and the companies in Thanachart Group place emphasis on the good corporate governance, social responsibility and environment, which is relevant with the business operation principle of Scotiabank. The social service and environment preservation activities were organized accordingly. In 2008, the Group coordinated with the excellent qualified professional team from the Continuing Education Center, Chulalongkorn University, in organizing a curriculum and training seminar regarding good corporate governance for Thanachart Group’s executives and staff. The curriculum covered good corporate governance and corporate social responsibility properly in order to instill conscience in the whole organization. Good corporate governance and corporate social responsibility will be applied in operation and will, in turn, benefit all the stakeholders genuinely. In the aspect of other developments, the integrated business knowledge and experience of executives and staff between Thanachart Group and Scotiabank on the foundation of corporate governance, social responsibility and environment will lead Thanachart Financial Conglomerate toward long-term success. Thanachart Bank will become the leading mid-size bank of the nation under strong and sustainable growth, meaning the growth with asset size compatible for competition and by having a financial performance on par with the average of commercial banking industry. Furthermore, Thanachart Bank will be a leading organization in corporate governance and corporate social responsibility. Suphadej Poonpipat Chief Executive Officer Thanachart Bank Public Company Limited ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
15
vision from our strategic partner: scotiAbank
Scotiabank was very pleased to recently increase its stake in Thanachart Bank, from the 25 percent stake we purchased in 2007 to 49 percent, the regulatory limit. This purchase demonstrates our commitment
to Thailand - a market where we have operated since 1981 - and the strength of our relationship with
Thanachart Bank. Working together over the past year, we have achieved good progress on our key joint projects.
These include growth in corporate banking and mortgages, reducing funding costs and improving the net
interest margin, enhancing our systems platform through the successful installation of a new core banking system, increasing cross-sell among different areas of the Bank, and strengthening our risk management practices. Both Scotiabank and Thanachart Bank - like other financial institutions around the world - have been affected by the global financial crisis. And we will continue to face further challenges in 2009. However, Thanachart Bank remains well capitalized with strong liquidity and experienced management. It operates under a universal banking model, with strong positions in insurance, brokerage and wealth management; market - leading positions in its key HP business line; and strong growth opportunities through cross sell from its expanding product suite, including credit cards, which will be launched later this year.
16
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
In Scotiabank, Thanachart Bank has a strong partner. Over the 177 years of our existence, we have developed a business platform that is highly diversified - by business, by geography and by product. As a result, we are well diversified from both earnings and risk perspectives. Scotiabank has a long history of managing
its risks and its expenses very well, and prudent risk management and cost control have helped us to avoid
the worst of the problems now facing many of the world’s largest financial institutions. We recently ranked in the top 10 in North America in terms of market capitalization, and the Oliver Wyman consulting group identified
us as one of the world’s 10 best performing banks during the financial sector’s most volatile period between August 2007 and December 2008. As Canada’s most international bank, we have developed a significant global network and tremendous expertise over the years that we can leverage to drive sustained, profitable growth
in each country where we operate. Finally, Scotiabank has an amazing global team of talented and dedicated people - including our partners at Thanachart Bank - who are focused on serving their customers and their communities. All these strengths have positioned us well to face the challenges presented by the difficult financial environment and help Thanachart Bank meet its growth objectives. We are confident about the future - for Scotiabank, for Thailand
and for Thanachart Bank - and we look forward to making continued progress together.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
17
management of thanachart group
Mr. Suphadej Poonpipat Vice Chairman, Chairman of the Executive Committee, and President and CEO, Thanachart Capital Public Company Limited Vice Chairman, Chairman of the Executive Committee, and Chief Executive Officer, Thanachart Bank Public Company Limited
Ms. suchada Pavananunt Director and Chief Executive Officer, Thanachart Fund Management Company Limited
MR. boonchai Kiattanavith Managing Director, Thanachart Fund Management Company Limited
Mr. Tragoolchitr Jittasaiyapan Chief Investment Officer, Thanachart Fund Management Company Limited
18
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Mrs. asvini Tailanga Managing Director, Securities Brokerage Group, Thanachart Securities Public Company Limited
Ms. Suvabha Charoenying Managing Director, Investment Banking and Investment Advisory Group, Thanachart Securities Public Company Limited
Mr. Nophadon Ruengchinda Managing Director, Thanachart Insurance Company Limited
Mr. Chartchai Parasuk, Ph.D. Managing Director, Thanachart Life Assurance Company Limited
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
19
management group of thanachart capital public company limited
Mr. Suphadej Poonpipat Vice Chairman, Chairman of the Executive Committee, and President and CEO
mr. Taweesak saksirilarp Member of the Executive Committee and Executive Vice President
Mr. Anuwat Luengtawekul Member of the Executive Committee and Executive Vice President
20
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
management group of thanachart bank public company limited
Mr. Suphadej Poonpipat Vice Chairman, Chairman of the Executive Committee, and Chief Executive Officer
MS. suvarnapha Suvarnaprathip Vice Chairperson of the Executive Committee
Mr. Piyaphong Artmangkorn Executive Vice President
Mrs. Noossara Roonsamrarn Executive Vice President
Assistant professor, flt. lt., dr. sumas wongsunoppArat, m.d., Ph.D. Executive Vice President (Chief Operating Officer)
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
21
Thai Economic Condition in 2008 and the Outlook for 2009
By Dr. Porametee Vimonsiri, Advisor on Policy and Planning, National Economic and Social Development Board (NESDB).
Thai Economic Condition in 2008 In the 2007 annual report, the economic outlook for 2008 depicted a sustained recovery with the growth rate in the forecast range of 4.0 - 6.0 percent. This was subject to two major risks: the repercussion of the US Subprime problem and the steep rise in oil prices possibly leading inflation to 3.5 percent. The forecast held true for nine months, till the outbreak of the US financial crisis stirring the global economy. In the first three quarters of 2008, the Thai economy expanded 5.1 percent. However, as major consumer economies shrank or slowed down due to the financial turmoil, the Thai economy contracted 4.3 percent in the fourth quarter, dragging the 2008 annual growth rate down to 2.6 percent. The root of the US financial debacle lied in the household sector’s overspending. The US Federal Reserves maintained the low interest rate policy for an extended period, while Asian countries’ current account surpluses helped finance the US current account deficit at low cost. Consequently, the US economy achieved a decade of continuous expansion driven by consumption growth on the back of accumulating household debt which eventually led to real estate bubble. When the Fed’s policy interest rate rose and caused a real estate price reduction, the result was increasing non-performing loans, which led to the Subprime mortgage problem and the price-down of mortgage-based financial instruments. Furthermore, amidst an array of complex and sophisticate financial innovations, the lax supervision over the financial sector only helped the financial meltdown to intensify and spill over to the global financial market. In September 2008, large US financial institutions facing severe financial problem; for instances, Merrill Lynch, Lehman Brothers, Fannie Mae, and Freddie Mac, filed for bankruptcy or sought the government bailout, spawning global financial crisis and serious credit crunch in both the US and Europe. The impacts of global economic slowdown on the Thai economy in the last quarter of 2008, which implied the economic outlook for 2009, highlighted on three major channels: • Lower export income, particularly in the last quarter of 2008 where export value in US dollar terms declined 9.4 percent, a reduction of approximately 100 billion baht. • Lower tourist receipts as the last quarter of 2008 observed 700,000 less foreign tourists than the same period last year, a 19.4 percent drop which accounted for the lost income of approximately 25 billion baht. • Lower price levels as the weakened world purchasing power induced price downward adjustments in energy as well as goods and services, and even deflation in certain countries. During the forth quarter of 2008, the prices of Thai major crops, including maize, cassava, rubber, and palm oil, declined 10.2, 26.0, 36.0, and 45.1 percent, respectively.
22
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
With lower income, both domestic consumption and production slowed down, the capacity utilization of the industrial sector reduced, as well as, the appetite for new investment. Employment slowed down with less worked hours, less wages, and even labor laid-off. In the last quarter of 2008, production in manufacturing, construction, transportation and communication, and hotels and restaurants sectors contracted by 6.8, 12.8, 10.6, and 8.3 percent, respectively. Meanwhile, the number of unemployment increased by 55,000 headcounts approximately from the third quarter, in particular, on the export-related industries such as electronics, textile and garment, and vehicles. Global economic crisis affected countries worldwide. In the forth quarter, major economies all contracted; the US (-0.2 percent), the UK (-1.0 percent), Japan (-4.6 percent), Euro area (-1.6 percent), Singapore (-3.7 percent), South Korea (-3.4 percent), and Taiwan (-8.4 percent). Japan and Taiwan shrank more than Thailand (-4.3 percent), while the US unemployment rose to 6.9 percent and forecasted to reach 10.0 percent in 2009. Even the economic top performers, such as China, India, and Vietnam, decelerated to 6.8, 4.9, and 5.6 percent in their growth rate, respectively. For China, an economic growth rate of below 6.0 percent pronounced a recession and rising unemployment. A drop in international trade adversely affected the regional economies. The latest January 2009 figures showed export value reduction in various countries. China’s export value declined by 17.5 percent, while South Korea, Taiwan, Singapore, and Vietnam shrank by 32.1, -42.9, -34.8, and -24.2 percent, respectively. Economic Slowdown and Recession in the Fourth Quarter of 2008
GDP (% YOY)
2007
2008
2008 H1
Q3
Q4
World
5.0
2.8
4.3
2.3
-0.2
US
2.0
1.3
2.3
0.8
-0.2
Euro area
3.0
0.7
1.8
0.6
-1.2
UK
3.1
0.7
2.0
0.0
-1.0
Japan
2.1
-0.7
1.1
-0.1
-4.6
Taiwan
5.7
0.1
5.4
-1.0
-8.4
South Korea
5.0
2.5
5.3
3.8
-3.4
Singapore
7.7
1.2
4.5
-0.7
-3.7
China
13.0
9.1
10.4
9.0
6.8
India
9.3
7.3
8.4
7.6
4.9
Malaysia
6.3
5.0
6.7
4.7
1.9
Philippines
7.2
4.6
4.7
4.6
4.5
Vietnam
8.2
6.3
6.6
6.5
5.6
Source: CEIC
The Economic Outlook for 2009 In facing current global financial crisis, the Thai economy was in a better position than during the “Tom Yum Kung” crisis, in 1997. Financial institutions remained strong with relatively low bad debts and above-BIS-standard capital adequacy, while the public debt also reduced to 36.0 percent of GDP, relatively low compared to other middle-income countries. Moreover, private consumption growth was not excessive in the past years, thus incurring small household debts. Therefore, Thailand is considered readier than several countries for the implementation of both fiscal and monetary policies to offset negative impacts of the global economic downturn.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
23
In addition, Thai economic stability remained sound in 2008. Headline inflation rose to a record high of 9.2 percent in July following oil price increases, but subsequently decreased such that the annual rate averaged at 5.5 percent with a slightly negative rate in December 2008. On the other hand, unemployment rate stood at 1.4 percent, although it has a tendency to increase. International reserves remained above 100 billion US dollars, while current account registered a slight deficit with the outlook for a surplus in 2009. Even though the effect from the global economic turmoil in the Thai economy in 2009 was apparent, the magnitude of these impacts remained uncertain. The forecast of world economic growth by IMF and other forecast houses were frequently revised down, from a forecast of 0.5 percent expansion in November 2008 to a forecast of 0.5 percent contraction in February 2009. Some analysts viewed this round of economic crisis as a long-hauled with the US economy beginning to recover in the forth quarter of 2009 or the beginning of 2010, instead of the third quarter of 2009 as earlier projected. And despite the beginning of the recovery process, the economic growth would not be as high as it had been in the previous four to five years. Major economies to face economic contraction in 2009 % YOY
2008
Forecast 2009
World
2.8
(-0.5) - (0.5)
US
1.3
(-1.6) - (-2.3)
Euro area
0.7
(-2.0) - (-2.5)
UK
0.7
(-3.2) - (-2.8)
Japan
-0.7
(-2.6) - (-3.0)
South Korea
2.5
-3.5
Taiwan
0.1
-3.0
Hong Kong
2.6
-3.8
Singapore
1.2
-3.8
Source: CEIC and compilation
Consequently, the economic forecast for 2009 was subject to high uncertainty and essentially dependable on the global economic climate. Near the end of February 2009, the National Economic and Social Development Board (NESDB) projected the Thai economic growth in 2009 to be in the range of (-1) - 0 percent, while other analyst houses centered on (-2) - 0 percent with few exceptions, namely Moody’s Investor Service and UBS scattering for (-2.4) and (-5.0) percent, respectively. However, consensus seemed to point that the Thai economy would face smaller contraction compared to other regional economies such as Taiwan, Japan, Singapore, Hong Kong, and South Korea.
24
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
THAI ECONOMIC OUTLOOK FOR 2009 Source
2009
Forecast date
Moody
(-2.38)
24 Feb 09
DBS
(-1.7)
23 Feb 09
Kim eng
(-1.0) - (0.0)
23 Feb 09
UBS
(-0.5)
23 Feb 09
Economist
(-1.8)
17 Feb 09
Citi
(-0.3)
12 Feb 09
UTCC
(-1.0)
5 Feb 09
BNP
(-0.9)
Feb 09
BBL
(-1.5) - (-1.0)
Feb 09
(-0.75)
30 Jan 09
BOT
0.0 - 2.0
19 Feb 09
TDRI
0.0
6 Feb 09
0.0 - 1.2
2 Feb 09
1.5
2 Feb 09
FPO
0.0 - 2.0
Feb 09
ADB
2.0
Jan 09
Phatra
1.5
12 Dec 08
World Bank
2.0
10 Dec 08
JP Morgan
KBank KTB Securities
Source: Compilation by NESDB
For 2009, Thai export value in US dollar terms is expected to contract by 13.1 percent and private investment shrink by 3.0 percent, while private consumption expand by 2.2 percent. The current account is likely to be in a surplus, approximately 0.9 percent of GDP. Inflation is forecasted at (-0.5) - (0.5) percent, while unemployment rate at 2.5-3.5 percent of labor force, or increasing from a 510,000 headcounts at the end of 2008 to 900,000 -1,300,000 headcounts in 2009. The economic forecast in 2009 is subject to several downside risks, namely the worse-than-expected global economic condition and the effectiveness in the implementation of fiscal stimulus measures, which could result in a larger economic contraction and unemployment than expected.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
25
Thai Economic Forecast for 2009 Actual
GDP (at constant prices, in billion baht)
Forecast
2006
2007
2008
2009
7,841.3
8,493.3
9,102.8
9,012.8
GDP growth (at constant prices, %)
5.2
4.9
2.6
(-1.0) - (0.0)
Investment (at constant prices, %)
3.9
1.3
1.1
-0.4
- Private
4.1
0.6
3.2
-3.0
- Public
3.3
3.4
-4.8
8.0
Consumption (at constant prices, %)
2.9
2.7
2.2
3.1
- Private
3.0
1.6
2.5
2.2
- Public
2.4
9.2
0.4
Export of goods (growth, %)
17.0
17.3
16.8
-13.1
Import of goods (growth, %)
7.9
9.1
26.4
-14.0
Trade balance (Bill. USD)
1.0
11.6
0.2
1.8
Current account (Bill. USD)
2.3
14.0
-0.2
2.3
Current account: GDP (%)
1.0
6.1
-0.1
0.9
Inflation (%)
4.7
2.3
5.5
(-0.5) - (0.5)
8.3
Source: NESDB, as of 23 February, 2009
As for the monetary sector in 2009, while liquidity in the financial system and excess liquidity of financial institutions are expected to remain high with the prospect of lower interest rates, financial institutions are likely to implement stringent credit standard to safeguard against future bad loans. This is in spite of the government’s effort in extending the role of credit guarantee bureau as well as encouraging financial institutions, particularly the government’s Special Financial Institutions “SFIs”, to boost credit provision. To a certain degree, these attempts help bolster the economy, but with limitation as the credit needs for business expansion and new investment remain low and the SFIs also need to remain heedful of potential bad loan. Regarding exchange rates, the baht against the US dollar slightly depreciated since the US financial crisis took place. The majority of analysts expected the US dollar to strengthen against other currencies until the global economic crisis unwound. As a result, the baht in 2009 is likely to slightly weakened. Economic Crisis Counteraction and Recovery Measures Most countries are now engaging in the same direction in maneuvering monetary and fiscal policies to prevent their economies from slipping further. Loosening monetary policy emphasizes on interest rate cuts as well as credit provisions for affected industries. On the other hand, fiscal policy tries to boost private income and consumption through tax reduction, cash coupons, subsidies for costs of living and certain expense, and assistance for unemployed persons while also makes commitment in public investment to create more jobs and opportunities for private investment.
26
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
For Thailand, the Bank of Thailand, in charge of monetary policy, successively cut the policy rate to 1.5 percent in February 2009, with the probability of further cuts. However, under current circumstance, fiscal policy plays key role in supporting the economy. With this regards, the government already implemented the urgent economic plan with an additional budget of 116 billion baht for fiscal year 2009. This set of urgent measures aims to restore household spending against the substantial decline in income from both export and tourism. These include the measures to maintain income levels for farmers, non-farm labors particularly those unemployed, students and their parents, low income households, senior citizen, entrepreneurs of small and medium enterprises as well as those highly affected businesses in export and tourism sectors. In the meantime, the government is also preparing public investment plan, which will be crucial to drive the economy forward and create sustainable jobs. Expected to be in effect during the second half of 2009, the plan covers public investments in the next few years, particularly the investment, often cited by earlier governments, to raise the country’s competitiveness such as logistics and basic infrastructure, irrigation system for both agricultural and manufacturing productions, renovation and creation of tourist attractions, as well as education and healthcare. With frequent changes of government during the previous year (in 2008, Thailand changed prime minister 4 times, not including the acting one), the public investment was unable to fully take the lead. However, in the face of mounting crisis impacts, it is required that public investment focuses on carefully selected projects with readiness and continuity in top priority such that it can help shore up the economy from the latter half of 2009 onwards. For business sector, during crisis-struck period, close monitoring and plans for working capitals need to be cautiously carried out in conjunction with cost cutting and productivity enhancement strategies. Moreover, with smaller market and reducing purchasing power, businesses must develop products and services which create value for customers, while also seek for growth-potential niche market. Businesses with solid financial position should take advantage of the crisis by improving their competitiveness in order to be ready to gain more benefits once the economy recovers. This might be a good opportunity for oversea expansion, brand-image building, research and development, as well as recruitment of highly needed personnel as these costs were marked down. Thailand had weathered through the 1997 severe economic crisis when the economy contracted more than 10 percent and almost half of banks’ credits were non-performing. Although we are encountering this current crisis in a much stronger health, we could not rely on external demand as a source of growth since the world economy has weakened considerably. Therefore, domestic stimulus measures and related projects must be timely implemented with continuity and efficiency. Most importantly, coordination and unity of public and private sectors as well as people in general are integral for the Thai economy to again successfully ride out the current economic storm.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
27
Management Discussion and Analysis of Financial Position and Performance
Management Discussion and Analysis of Financial Position and Operating Results (consolidated financial statements)
In July 2007, Thanachart Group had restructured its shareholdings in the companies within the group. Details of shareholdings in all the related businesses are illustrated in Section 2: Nature of Business Operation regarding the Key Changes and Developments. Therefore, at present, Thanachart Bank Public Company Limited was the shareholder in the following companies: • Companies that operate in the financial businesses consist of 1) Thanachart Securities Public Company Limited; 2) Thanachart Fund Management Company Limited; 3) Thanachart Insurance Company Limited; 4) Thanachart Life Assurance Company Limited; 5) Thanachart Group Leasing Company Limited; 6) National Leasing Company Limited; 7) T Leasing Company Limited; and 8) Thanachart Broker Company Limited.
• Companies that operate in the supporting businesses consist of 1) Thanachart Legal and Appraisal Company Limited; and 2) Thanachart Management and Service Company Limited. With such shareholdings, Thanachart Bank was able to recognize the operating results for 2007 of the subsidiaries, in which it invested in, since the date of investment (on 1 July 2007: as under the share purchase agreement made between the Bank and the Parent Company (Thanachart Capital Public Company Limited) on 12 July 2007, the Parent Company agreed to transfer all of their benefits in those subsidiaries to the Bank as from 1 July 2007). Overview of operating results (Unit: Million Baht)
Change from 2007
Income statement 2008
2007
Interest and dividend income 20,688 17,488 Interest expenses 9,398 9,396 Bad debt and doubtful accounts and loss (gain) on debt restructuring 3,968 2,692 Non-interest income 10,700 6,111 Non-interest expenses 15,535 9,905 Corporate income tax (including refunded corporate income tax) 586 259 Net income attributable to minority interests 31 20 Net income for the year 1,870 1,327 Earnings per share (Baht) 1.08 0.84 Weighted average number of ordinary shares (shares) 1,734,619,292 1,583,999,082
28
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
INCREASE/ (DECREASE)
PERCENT
3,200 2
18.29 0.02
1,276 4,589 5,630
47.38 75.10 56.85
327 11 543
125.97 56.70 40.89
In 2008, net income of Thanachart Bank and its subsidiaries amounted to 1,870 million baht,
an increase of 543 million baht or 40.89 percent from the previous year. This was due to the continuous expansion of businesses of Thanachart Group, the increase in loan spread from 3.30 percent to 4.03 percent, and the increase in non-interest income of 75.10 percent which was a result of the continuous growth of commercial bank business, securities business, fund management business, as well as life insurance and
non-life insurance business. However, non-interest expenses increased by 56.85 percent due to business expansion and the investment in information technology and infrastructure system. As a result, cost to income ratio was reported at 70.65 percent, close to the previous year. The details on the key changes are as follows:
Interest and dividend income
In 2008, interest and dividend income of Thanachart Bank and its subsidiaries amounted to 20,688 million baht, an increase of 3,200 million baht or 18.29 percent from the previous year. This was mainly due to the increase in interest income from hire purchase loans expansion.
Interest expenses
Interest expenses were reported at the amount of 9,398 million baht, close to that of the previous year. This was due to the decrease in the cost of fund, following the declining of market interest rate during the second half of 2008. At the same time, the deposits and short-term borrowings increased from that of the previous year by 69,050 million baht or 27.82 percent due to the increase in deposits taking through the branch expansion to add more channel for deposits taking. Furthermore, the financial products were launched to respond to the customers’ needs and the short-term bills of exchange were issued to add more saving channel for customers.
Bad debt and doubtful accounts
In 2008, expenses on bad debt and doubtful accounts of Thanachart Bank and its subsidiaries amounted to 3,968 million baht, an increase of 1,276 million baht or 47.38 percent from the previous year, due to the economic slowdown that affected debt repayment ability of debtors. However, the Bank and its subsidiaries had imposed more stringent rules on credit lending, including enhanced the efficiency of debt collection process to reduce expected losses in the future.
Non-interest income
Non-interest income of Thanachart Bank and its subsidiaries amounted to 10,700 million baht, an increase of 4,589 million baht or 75.10 percent. This was mainly due to the continuous growth of commercial bank business, life insurance and non-life insurance business, securities business, and fund management business, even though some part of those businesses had been affected from the slowdown of capital market, following the depressive global markets.
Non-interest expenses
Non-interest expenses of Thanachart Bank and its subsidiaries were reported at the amount of 15,535 million baht, an increase of 5,630 million baht or 56.85 percent from the previous year. This was mainly due to the increase in personnel related expenses as well as expenses related to premises and equipments, as a result of the investment in information technology and infrastructure system to support business expansion in the future.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
29
Financial position of Thanachart Bank and its subsidiaries (Unit: Million Baht)
Change from 2007
Balance sheet 2008
Assets Cash Interbank and money market items (interest bearing) Securities purchased under resale agreements Investments - net Loans and accrued interest recievables - net Property foreclosed - net Land, premises and equipment - net Other assets Total assets
2007
INCREASE/ (DECREASE)
PERCENT
4,018
3,275
743
22.70
61,332
36,782
24,550
66.74
- 30,712 269,343 1,600 2,311 9,031
2,500 23,172 223,938 1,424 2,087 7,609
(2,500) 7,540 45,405 176 224 1,422
(100.00) 32.54 20.28 12.41 10.72 18.69
378,347
300,787
77,560
25.79
As at 31 December 2008, total assets of Thanachart Bank and its subsidiaries were reported at
the amount of 378,347 million baht, an increase of 77,560 million baht or 25.79 percent from the end of
the previous year. This was mainly due to the increase in loans and accrued interest recievables amounting to 45,405 million baht or 20.28 percent as a result of the expansion of automobile hire purchase loan, corporate loan, and SMEs loan, and due to the increase of the interbank and money market items (interest bearing) by 24,550 million baht or 66.74 percent. (Unit: Million Baht)
Change from 2007
Balance sheet 2007
INCREASE/ (DECREASE)
270,163
188,660
81,503
43.20
6,677
3,113
3,564
114.49
Securities business payable
855
1,244
(389)
(31.30)
Liability payable on demand
1,317
1,329
(12)
(0.93) (15.31)
2008
PERCENT
Liabilities and shareholders’ equity Deposits Interbank and money market items (interest bearing)
61,150
72,203
(11,053)
Accrued interest payable
1,721
1,429
292
Life premium reserve
7,822
5,593
2,229
39.84
Other liabilities
7,301
6,236
1,065
17.12
Total liabilities
357,006
279,807
77,199
27.59
21,278
20,923
355
1.70
63
57
6
10.25
378,347
300,787
77,560
25.79
Borrowings
Shareholders’ equity of the Bank Minority interest Total liabilities and shareholders’ equity
20.41
As at 31 December 2008, total liabilities of Thanachart Bank and its subsidiaries were reported at
the amount of 357,006 million baht, an increase of 77,199 million baht or 27.59 percent from that of the end
of 2007. The shareholders’ equity of the Bank was 21,278 million baht, an increase of 355 million baht or
1.70 percent from the end of 2007. The increase of shareholders’ equity was due to the profit in 2008, despite the revaluation deficit on investments which increased by 990 million baht.
30
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Management Discussion and Analysis of Financial Position and Operating Results (financial statements of the Bank only) Overview of operating results In 2008, net income of Thanachart Bank amounted to 1,304 million baht, an increase of 314 million baht or 31.67 percent from the previous year. This was due to the increase of loan spread from 3.30 percent to 3.72 percent because of the continuous growth of loans along with proper cost management by acquiring deposits through 213 branches of the Bank, the launch of various products, and the increase in non-interest income at 14.02 percent. At the same time, non-interest expenses increased by 27.58 percent mainly due to the increase of personnel related expenses and expenses related to premises and equipment incurring from the investment in information technology and infrastructure system as well as the Bank’s brand building of being
a medium-sized commercial bank, in order to support business expansion in the future. However, the Bank was able to manage cost to income ratio to be at the level of 61.06 percent, close to that of the previous year.
The details of the key changes are as follows: 1. Regarding loan expansion, Thanachart Bank continuously expanded credit lending, both in hire purchase loan and corporate loan. Particularly, hire purchase loan, as the main business of the Bank, grew from 162,205 million baht to 198,344 million baht, or 22.28 percent growth from the end of 2007. 2. The deposits base expanded during the period of market rate declining, while the deposit proportion was properly managed, along with the launch of new products to add alternatives for customers in order to expand customer base and to increase market share. As a result, cost of fund of Thanachart Bank decreased to 3.21 percent from 3.76 percent in 2007. 3. Regarding the non-interest income and the management of operating expenses, in 2008, Thanachart Bank rapidly generated non-interest income by launching products, and restructuring infrastructure and other working systems to support business expansion. As a result, the Bank was able to maintain
non-interest income ratio at the level of 17.92 percent. From the aforementioned factors, the operating results of Thanachart Bank in 2008 significantly improved. Income before bad debt expenses and income tax amounted to 4,966 million baht, an increase of 1,328 million baht or 36.52 percent from the previous year. Net income amounted to 1,304 million baht, an increase of 314 million baht or 31.67 percent, although the economy in 2008 had slowed down and affected business operation and debt repayment ability of hire purchase debtors. Non-performing loans increased to 7,167 million baht from 5,213 million baht in 2007. As a result, the expenses for bad debt and doubtful accounts increased by 942 million baht. However, the Bank and its subsidiaries imposed more stringent rules on credit lending and enhanced efficiency of debt collection process to reduce expected losses in the future. Interest and dividend income In 2008, interest and dividend income of Thanachart Bank amounted to 19,897 million baht,
an increase of 2,774 million baht or 16.19 percent from the previous year. This was mainly due to the increase in interest income from hire purchase loans expansion. (Unit: Million Baht)
Change from 2007 INCREASE/ PERCENT (DECREASE)
INTEREST AND DIVIDEND INCOME 2008
2007
1. Loans
4,228
4,528
(300)
(6.62)
2. Interbank and money market items
1,512
1,183
329
27.81
13,063
10,370
2,693
25.96
1,094
1,042
52
4.93
19,897
17,123
2,774
3. Hire purchase 4. Investment Total interest and dividend income
16.19
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
31
Interest expenses Interest expenses were reported at the amount of 9,429 million baht, an increase of 43 million baht
or 0.45 percent from last year. Deposits and short-term borrowings increased by 70,676 million baht or
28.49 percent comparing to that of 2007, while the cost of fund decreased following the declining of market interest rate during the second half of 2008. Bad debt and doubtful accounts Expenses on bad debt and doubtful accounts of Thanachart Bank for the year 2008 were reported at the amount of 3,548 million baht, an increase of 942 million baht or 36.14 percent from the previous year due to the economic slowdown that affected debt repayment ability of debtors. In case where non-performing loans increased, the provision had to be put in place according to the regulation which stipulates allowance for doubtful accounts and the deduction of collaterals from loan values to set aside provisions for sub-standard loans, enforced by the Bank of Thailand (BOT) since December 2006. Non-interest income In 2008, non-interest income of Thanachart Bank amounted to 2,286 million baht, an increase of
281 million baht or 14.02 percent from the previous year. This was mainly due to the increase in fee based
and service income in the amount of 301 million baht and the gain on foreign exchange in the amount of
173 million baht. However, gain on investment decreased, following the depressive capital market. (Unit: Million Baht)
Change from 2007
non-interest income 2008
1. Gain on investments
(206)
2007
71
INCREASE/ (DECREASE)
PERCENT
(277)
(389.72)
2. Fee and service income
• Acceptances, aval and guarantees
35
22
13
58.40
• Discounted income on insurance premium
709
760
(51)
(6.70)
• Others
920
581
339
58.36
3. Gain (loss) on foreign exchange
223
50
172
342.73
4. Income from supporting services
291
321
(30)
(9.06)
5. Other income
314
200
114
56.76
2,286
2,005
281
14.02
Total non-interest income
Non-interest expenses In 2008, non-interest expenses of Thanachart Bank were reported at the amount of 7,788 million baht, an increase of 1,684 million baht or 27.58 percent from the previous year. This was mainly due to the increase in personnel related expenses of 820 million baht and the increase in the expenses related to premises and equipment of 249 million baht as a result of branch expansion, the investment in information technology and infrastructure system, and the promotion of the Bank’s image as a medium-sized commercial bank to support business expansion in the future.
32
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Summary of income statements (Unit: Million Baht)
Change from 2007
income statement 2008
Interest and dividend income Interest expenses Net interest and dividend income Bad debt and doubtful accounts and loss (gain) on debt restructuring Net interest and dividend income after bad debt Non-interest income Non-interest expenses Income before corporate income tax Corporate income tax (including refunded corporate income tax) Net income for the year Earnings per share (Baht) Weighted average number of ordinary shares (shares)
2007
INCREASE/ (DECREASE)
PERCENT
19,897 9,429 10,468
17,123 9,386 7,737
2,774 43 2,731
16.19 0.45 35.29
3,548 6,921 2,286 7,788 1,418
2,606 5,131 2,005 6,105 1,032
942 1,789 281 1,684 387
36.14 34.87 14.02 27.58 37.49
114 41 1,304 991 0.75 0.63 1,734,619,292 1,583,999,082
73 314
178.18 31.67
Financial position Assets As at 31 December 2008, total assets of Thanachart Bank amounted to 368,272 million baht,
an increase of 77,175 million baht or 26.51 percent from the end of 2007. This was mainly due to the increase of 46,226 million baht in loans and the increase of 27,934 million baht in short-term liquidity. Thanachart Bank’s credit lending was reported at the amount of 266,843 million baht, an increase of 46,226 million baht or 20.95 percent from the end of 2007. This was mainly due to the expansion in automobile hire purchase loans of 36,199 million baht and in corporate loans of 13,344 million baht as well as in SMEs loans of 6,603 million baht. However, loans to companies in Thanachart Group decreased by 8,426 million baht from the normal repayment. Short-term liquidity of Thanachart Bank amounted to 86,005 million baht, an increase of 27,934 million baht or 48.10 percent, following the increase of the Bank’s deposits based and short-term borrowings. Nevertheless, the Bank efficiently managed excess liquidity in order to maintain overall yield level, comparing to that of the previous year. total assets (Unit: Million Baht)
Change from 2007
items of assets 2008
Interbank and money market items (interest bearing) Securities purchases under resale agreements
2007
INCREASE/ (DECREASE)
PERCENT
59,418
35,603
23,815
-
2,500
(2,500)
(100.00)
66.89
26,586
19,968
6,618
33.14
Loans and accrued interest recievables - net
266,843
220,617
46,226
20.95
Total earning assets - net
Net investments
352,847
278,688
74,159
26.61
Other assets
15,425
12,410
3,015
24.29
Total assets
368,272
291,098
77,175
26.51
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
33
Asset quality
1. Loans, receivables, and accrued interest receivables As at 31 December 2008, Thanachart Bank’s loans and accrued interest receivables classification, according to the definition of the BOT, amounted to 311,981 million baht, an increase of 86,697 million baht
or 38.48 percent from the end of the previous year. During 2008, Thanachart Bank entered into various debt restructuring agreements with 214 debtors in total. Debt restructuring agreements were in such form as reconditioning of debt repayment, transferring of assets and/or equity and/or reconditioning of repayment term and conditions. The outstanding balance before debt restructuring amounted to 621 million baht. As at the end of 2008, the Bank had 381 debtors who entered into the debt restructuring agreement out of 707,434 debtors in total. The outstanding balance of principal and accrued interest receivable of such debt restructuring accounts amounted to 2,645 million baht, a decrease of 2,698 million baht from 2007. Loans and accrued interest receivables classified by types of debtors
items of loans and accrued interest receivables Total debtors
31 December 2008
31 December 2007
no. of debtors amount no. of debtors amount (person) (million baht) (person) (million baht)
707,434
311,981
537,955
225,284
Debtors entering into debt restructuring during the year
• Outstanding balance before debt restructuring
214
621
63
308
• Outstanding balance after debt restructuring
214
621
63
308
381
2,645
292
2,698
0.05
0.85
0.05
1.20
Total debtors entering into debt restructuring
as at the end of the year
Percentage of debtors entering into debt restructuring
as at the end of year to total debtors
Concentration of loans As at the end of 2008, Thanachart Bank’s loans mostly concentrated in hire purchase loans, which
the Bank had started the service since May 2005, accounted for 76.17 percent of the total loans and accrued interest receivables. Next in the order were loans to real estate and construction and loans to others, which accounted for 5.62 percent and 5.46 percent in 2008, respectively. In comparison to loan structure in 2007, the Bank’s loans mostly concentrated in hire purchase loans at 79.72 percent of the loans and accrued interest receivables, while next in order were loans to parent company and related companies and loans to others at 9.62 percent and 5.78 percent of the loans and accrued interest receivables, respectively. In 2008, loans to parent company and related companies decreased from that of the previous year both in volume and proportion. This was mainly due to the Parent company’s repayment of its borrowings in accordance with the business restructuring plan of Thanachart Group which was approved by the BOT. When considering the expansion and the concentration of loans, excluding loans to parent company and related companies, it showed that, in this year, Thanachart Bank expanded its credit portfolio to real estate and construction business, manufacturing and commercial business as well as public utilities and services.
The expansion of those loans increased to 15.54 percent from 10.09 percent in 2007.
34
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Loans Classified by Types of Business in 2007 Manufacturing and Commercial 3.46%
Loans Classified by Types of Business in 2008 Manufacturing and Commercial 4.92%
Real Estate and Construction 3.01%
Real Estate and Construction 5.62%
Public Utility and Service 3.60% Others 6.39%
Public Utility and Service 5.00%
Others 5.46%
Mortgage 3.80%
Mortgage 2.84% Hire Purchases 76.17%
Hire Purchases 79.72%
Maturity of Debtors When classifying loans and accrued interest receivables in 2008 by the remaining maturity of loans,
it showed that majority of loans was loans with remaining maturity of over one year, which accounted for 85.57 percent of total loans and accrued interest receivables. Loans with remaining maturity of less than one year and call loans (including matured loans) accounted for 8.09 percent and 6.33 percent of total loans and accrued interest receivables in 2008, respectively. All the loans for local debtors were denominated in Thai Baht.
In comparison with 2007, the proportion of loans with remaining maturity over one year increased while that of call loans decreased in 2008. loans classified by remaining maturity of loan contract
84.25
5.12
10.63
(Year)
2007
on call
less than one year
over one year
8.10
85.57
6.33
2008
10
20
(Percent) 0
30
40
50
60
70
80
90
100
2. Loans classification according to the guideline of the BOT As at 31 December 2008, loans and accrued interest receivables classified under the BOT’s guideline of Thanachart Bank was reported at the amount of 311,981 million baht, an increase of 86,697 million baht or 38.48 percent from the end of the previous year. As at 31 December 2008, the Bank set aside allowance for doubtful accounts amounting to 6,268 million baht. Also, the Bank set aside an additional allowance for doubtful accounts amounting to 97 million baht. As a result, the total allowance for doubtful accounts amounted to 6,365 million baht, an increase of 1,840 million baht from the end of previous year.
The ratio of the Bank’s total allowance for doubtful accounts to the outstanding loans and accrued interest receivables was 2.04 percent. ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
35
Summary of loans classification under the BOT’s guideline (Unit: Million Baht)
debt value/book value
loans and accrued interest receivables(1)
allowance for doubtful accounts
31 december 2008
31 december 2007
280,590
201,017
752
629
24,186
19,019
178
123
Substandard
1,547
1,299
1,163
964
Doubtful
1,629
1,614
1,156
901
Normal Special mention
Doubtful of loss Total
31 december 2008
31 december 2007
4,029
2,335
3,019
1,558
311,981
225,284
6,268
4,175
Additional allowance for doubtful accounts
97
350
Total allowance for doubtful accounts
6,365
4,525
2.04
2.01
Ratio of total allowance for doubtful accounts to loans and accrued interest receivables (percent) Note:
(1)
Debt value/Book value of normal and special mention loans did not include accrued interest receivables
3. Non-performing loans (NPLs) As at 31 December 2008, Thanachart Bank’s non-performing loans was reported at the amount of 7,167 million baht, an increase of 1,954 million baht from the end of the previous year due to economic slowdown that affected repayment ability of hire purchase debtors, which was the Bank’s main business. However, the Bank had imposed more stringent measures in credit lending as well as enhanced efficiency of debt collection process to decrease future losses. The ratio of non-performing loans to total loans (NPL Ratio) was at 2.3 percent, close to that of the previous year. Non-performing loans after deducting allowance (NPL-net) amounted to 1,830 million baht, where the ratio of NPL-net to total loans was at 0.60 percent. Allowance for doubtfuls was 6,365 million baht or accounted for 88.80 percent of non-performing loans. Non-Performing Loans (NPLs) (Unit: Million Baht) 31 december 2008
Total non-performing loans (NPLs) Percent of NPLs to total loans Total allowance for doubtful accounts
31 december 2007
7,167
5,213
2.30
2.31
6,365
4,525
88.80
86.80
1,830
1,790
0.60
0.81
Ratio of total allowance for doubtful accounts to
NPLs (Percent)
NPL-net under new BOT’s guideline Percent of NPL-net
NPLs classified by types of business Service 3.93%
Others 14.98%
NPLs classified by types of loan classification Hire Purchase Loan 43.85%
Manufacturing and Commercial 13.81%
Substandard 21.47%
Doubtful 22.61%
Real Estate and Construction 16.44%
36
Doubtful of Loss 55.92%
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Mortgage Loan 6.99%
4. Investment in securities In 2008, total investments in securities of Thanachart Bank were reported at the amount of 22,346 million baht. Most of the investments were in government and state enterprise securities, which accounted for 56.39 percent. This followed by the investments in held-to-maturity foreign debt securities, in which the Bank had forward agreement to fully hedge exchange rate risk for all foreign investments and related interests which amounted to 21.69 percent of the Bank’s investments in securities. Taking into consideration revaluation surplus (deficit) on investments and allowance for impairment, the Bank’s net investments in 2008 was
22,104 million baht, an increase of 15,673 million baht or 41.03 percent from 2007. Details of the investments in securities were as follows: Table of investments in securities classified by types of instruments (Unit: Million Baht)
types of investment
31 december 2008
percent
31 december 2007
percent
Debt securities Government and state enterprise securities
• Available-for-sale
2,570
11.50
583
3.70
• Held-to-maturity
10,032
44.89
10,204
64.77
Private debt securities
• Available-for-sale
3,134
14.03
1,304
8.28
• Held-to-maturity
-
-
-
-
4,847
21.69
1,350
8.57
Foreign debt securities
• Held-to-maturity
Equity securities Listed securities
• Available-for-sale
575
2.57
413
2.62
416
1.86
836
5.31
Unit trusts
• Available-for-sale
General investments
655
2.93
945
6.00
Other securities
117
0.53
119
0.75
22,346
100.00
15,754
100.00
(33)
30
Total investment in securities Add (Less) Allowance for revaluation
Allowance for impairment
Total investments - net
(209) 22,104
(111) 15,673
Liquidity As at the end of 2008, Thanachart Bank’s net cash flows used in financing activities was 12,704 million baht and in investing activities was 6,490 million baht; while most of the cash flows was generated from operating activities, which was in the amount of 19,937 million baht. As a result, the Bank’s cash flow and cash equivalents increased by 743 million baht. As at the end of 2008, the Bank had cash and cash equivalents increased to 4,017 million baht. The important components were as follows: • Cash flows from financing activities were used in repayment of borrowings in the amount of 14,676 million baht, payment of loan interests in the amount of 2,282 million baht and dividend payment in the amount of 746 million baht. Also, Thanachart Bank received cash from the issuance of unsecured subordinated debentures in the amount of 5,000 million baht during 2008. • An increase in cash flows from operating activities was mainly contributed by an increase in deposits in the amount of 81,746 million baht and the interbank and money market items (liabilities) in the amount of 3,863 million baht. The cash was mostly used in credit lending in the amount of 55,468 million baht and in interbank and money market items (assets) in the amount of 24,908 million baht. ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
37
• Regarding the uses of cash flows, cash flows were used in investing activities in the investments in securities, which increased by 6,920 million baht. In addition, cash paid for the purchase of equipment amounted to 490 million baht and cash paid for acquisition of investment in subsidiaries amounted to 431 million baht; while the cash receipts from investing activities were interests from investments in the amount of 763 million baht and dividend receipt in the amount of 342 million baht. Capital expenditure During 2008, number of branches of Thanachart Bank increased by 47 branches from 2007 to 213 branches. As a result, there were expenses related to rent, premises decoration, information and technology system, and other equipments necessary for the operations. During 2008, the Bank’s cash paid for the purchase of equipment increased by 490 million baht. Sources of funds As at 31 December 2008, Thanachart Bank’s total liabilities were reported at the amount of 347,002 million baht increased 76,600 million baht or 28.33 percent from that of the end of 2007. This was mainly due to the increase in deposits through the Bank’s branches and the launching of financial products that responded to customers’ needs. The key items in liabilities and shareholders’ equity were as follows: • Total deposits were 270,832 million baht, an increase of 81,746 million baht or 43.23 percent from the end of the previous year. Most of the deposits had remaining maturity of not over one year, which accounted for 99.48 percent of total deposits, an increase from 99.28 percent in the previous year.
deposits classified by remaining maturity of deposits contract
0.72
99.28
(Year)
2007
less than 1 year
over 1 year
0.52
99.48
2008
(Percent) 0
10
20
30
40
50
60
70
80
90
100
• Total borrowings were reported at the amout of 62,288 million baht, of which 47,928 million baht was short-term borrowings and 14,360 million baht was long-term borrowings. Short-term borrowings decreased by 11,070 million baht or 18.76 percent from the end of the previous year, while long-term borrowings increased by 1,400 million baht or 10.80 percent from the end of the previous year. This was due to Thanachart Bank issued seven years unsecured subordinated debentures amounting 5,000 million baht with average interest rate at 5.61 percent during the second quarter of 2008 in order to support the continuous expansion of loans in the future and to compensate part of borrowings that were matured within the same quarter.
38
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Shareholders’ equity As at 31 December 2008, shareholders’ equity was reported at the amount of 21,270 million baht,
an increase of 575 million baht or 2.87 percent from the end of 2007. This was mainly due to net income of 2008. During the second quarter of 2008, Thanachart Bank paid out dividend from net income of 2007 to shareholders at the rate of 0.43 baht per share, totalling at 746 million baht. Moreover, revaluation deficit on investments increased by 155 million baht. Ratio of Debt to Equity Thanachart Bank’s ratio of Debt to Equity increased from 13.07 in 2007 to 16.31 in 2008. This was due to the continuous expansion in deposits and short-term borrowings, together with the launch of variety
of deposit products in order to provide more saving options and deposit channels to customers. As a result, deposits and short-term borrowings increased by 70,676 million baht or 28.49 percent. Also, long-term borrowings increased by 1,400 million baht or 10.80 percent from that of the end of the previous year. Liabilities and shareholders’ equity (Unit: Million Baht)
Change from 2007 2008
2007
INCREASE/ (DECREASE)
270,832
189,086
81,746
43.23
7,030
3,145
3,885
123.56
Short-term borrowings
47,928
58,998
(11,070)
(18.76)
Long-term borrowings
14,360
12,960
1,400
10.80
Deposits Interbank and money market items (interest bearing)
Total interest-bearing liabilities
PERCENT
340,150
264,189
75,961
28.75
Other liabilities
6,852
6,213
638
10.27
Total liabilities
347,002
270,402
76,600
28.33
21,270
20,695
575
2.78
368,272
291,098
77,175
26.51
Shareholders’ equity Total liabilities and shareholders’ equity
Obligation Thanachart Bank’s total obligations increased from 75,066 million baht in 2007 to 87,095 million baht in 2008. Every items of obligation increased from that of 2007. In addition, Thanachart Bank was obligated to an estimated share of potential losses from the sales of non-performing loans to Thai Asset Management Corporation (TAMC) in the amount of 89 million baht.
This amount was presented as a part of allowance for impairment of long-term investments in debt securities. Furthermore, the Bank is committed to compensate losses from the sales of mortgage loans to the Secondary Mortgage Corporation (SMC). The compensation was for losses arising from the number of default mortgage loans up to a maximum of 20 percent of the value of the aforementioned loans. As at 31 December 2008,
the maximum obligation did not exceed 3 million baht. Relationship between sources of funds and uses of funds In 2008, Thanachart Bank’s main sources of funds consisted of deposits of 270,832 million baht and borrowings of 62,288 million baht. For the uses of funds, 272,925 million baht was used in loans and 26,828 million baht was used in investments. When comparing between sources and uses of funds based on maturity date of financial instruments counting from balance sheet date as at 31 December 2008, it illustrated that most of the sources of funds came from deposits with remaining maturity less than one year which accounted for 58.66 percent of total sources of funds; followed by 22.22 percent of deposits at call and 14.39 percent of borrowings with remaining maturity
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
39
less than one year. On the other hand, the uses of funds was mostly concentrated in loans with remaining maturity more than one year accounted for 58.61 percent of total uses of funds and loans with remaining maturity less than one year accounted for 24.91 percent. However, such mismatch between sources and uses of funds was considered as normal situation and practice in the business of commercial banks and general financial institutions as common behavior of deposit customers were to extend the contracts once they were expired. Furthermore, the Bank had policies that aimed on seeking the sources of funds that were most compatible with the uses of funds through financial instruments on efficient risk management. This enabled the Bank to receive in advance the signal of any impacts on sources and uses of funds. Details of key sources and uses of funds classified by maturity date of each item counting from balance sheet date as at 31 December 2008 were as follows: Type
At Call less than 1 year more than 1 year not specified total Million Percent
Baht
Million
Percent Million Percent Million
Baht
Baht
Percent Million
Baht
Percent
Baht
Sources of funds Deposits
74,010
Borrowings Total sources of funds
2
Note:
(1)
47,926 14.39
0.42
-
-
270,832
81.30
62,288
18.70
14,360
4.31
-
-
4.74
-
- 333,120 100.00
22,573
Investments Total uses of funds
0.00
1,414
74,012 22.22 243,334 73.05 15,774
Uses of funds Loans(1)
22.22 195,408 58.66
- 22,573
7.53 -
74,668 24.91 175,684 58.61 4,248
1.42
17,008
-
-
272,925
91.05
26,828
8.95
5.67
5,572
1.86
7.53 78,916 26.33 192,692 64.28
5,572
1.86 299,753 100.00
The outstanding balance of loans and debtors at call also included loans and debtors whose income recognition was put on hold.
Maintenance of ratio of capital fund to risk-weighted assets (BIS ratio) As at 31 December 2008, Thanachart Bank’s total capital fund was 28,247 million baht, of which 20,261 million baht was Tier I capital and 8,250 million baht was Tier II capital. The Bank’s BIS ratio under Basel II was at 11.18 percent, while BIS ratio under Basel I as at the end of 2007 was at 12.00 percent. Such ratio was still higher than the BOT’s minimum requirement of 8.50 percent. Details of ratio of capital fund to risk-weighted assets were as follows: Ratio of capital fund to risk-weighted assets (BIS ratio) 31 December 2008* Million baht
percent
31 December 2007 Million baht
percent
Tier I capital
20,261
8.02
20,017
10.15
Total capital
28,247
11.18
23,661
12.00
Note: * The BOT stipulates commercial banks to report BIS ratio under Basel II since December 2008 and Thanachart Bank chose
the Standardized Approach for the calculation.
Key factors and influences that may affect future results of the operations or financial position Supporting factors to the business 1. Declining trend of interest rate Thanachart Bank would have decreasing cost on interests under declining trend on interest rate. Also, the Bank’s deposit base was larger than loan portfolio. Thus, decreasing trend in interest rate of both on deposits side and loans side would potentially lead to better operating results. 40
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
2. Regulation on the supervision of capital fund under Basel II In the overall, the enforcement of Basel II would benefit to the businesses of Thai commercial banks as it helped strengthen financial position of financial institutions in order to cope with financial liberalization in the future. Nevertheless, capital increase may be required for some banks in compliance with Basel II. As for Thanachart Bank, whose loan portfolio comprised mostly of retail loans, the capital required for supporting such business would be less. 3. Universal banking As Thanachart Group had provided full financial services, including bank, securities, fund management, non-life insurance and life insurance; new products were effectively offered to serve the needs of customers. 4. Knowledge-based organization The management’s strategy aimed at enhancing employees’ knowledge and motivating the organization to be a knowledge-based organization, which would lead to better work efficiency of employees. Besides, there were also the improvements in customers’ service to provide impressive services to customers.
In the future, such strategy would be a more important competitive strategy than pricing strategy. 5. Market leader in automobile hire purchase loans Thanachart Bank was still the leader in hire purchase loans for new cars and used car, and holds the highest market share in hire purchase loans for new cars. The Bank was very skillful in hire purchase credit lending and had a good relationship with dealers for a long time. As a result, the Bank had capability and was ready to penetrate the used cars hire purchase market which would produce better operating results. As such, the hire purchase customer group was rated good quality customers for the Bank. Thus, the Bank was attempting to cross-sell the Banks’ other products to serve the needs of those customers. 6. Branches expansion along with the developments of information technology system and infrastructure system Thanachart Bank would be more accessible to customers and capable for the launch of variety financial products to meet customers’ needs, which would lead to higher potential for competition. However, extensive branch expansion and investments in Information Technology system resulted in higher operating
expenses of the Bank. Negative factors or limitations to the business operations 1. Economic slowdown The year 2008 was the year that Thailand still encountered with various risk factors, continuing from 2007, and those risk factors became increasing in severity and potentially wider spread out. Those risk factors included (1) global financial crisis problems, (2) global economic slowdown, (3) oil price fluctuation, and
(4) political situation problem. Such risk factors affected a lot on the confidence of consumers, investors and tourists. 2. More commercial banks entering into hire purchase market As commercial banks were allowed to operate hire purchase business according to the BOT’s financial sector master plan and large car manufacturers tended to offer hire purchase services to their customers; thus, more players were entering to take their shares in hire purchase market. 3. State-owned enterprise financial institutions and non-commercial bank financial institutions played more roles in both deposits acquiring and credit lending 4. Aggressive price competition despite the declining trend of interest rate Under the competition on price or interest rate, Thanachart Bank as a medium to small-sized bank with limit number of branches would have a burden of high interest expenses as they had to offer higher deposit rate to compete for market share, which would result in lower spread between lending rate and deposit rate.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
41
5. Rules and regulations of supervisory agencies • Regarding minimum capital requirement under Basel II, Thanachart Bank had already prepared for both the system and the plan on business expansion in order to maintain appropriate level of capital. • Due to the Deposit Protection Agency Act, Thanachart Bank had launched various products to add deposit alternative and to build the confidence to customers, aiming to maintain the volume of deposits and customer base of the Bank. Thanachart Securities Public Company Limited Management discussion and analysis of financial position and operating results for the year ended
31 December 2008 comparing to that of the year ended 31 December 2007. Financial position Assets As at the end of 2008, the Company’s total assets amounted to 3,105.99 million baht, a decrease of 15.94 percent from the end of 2007. Most of assets consisted of net securities business receivables and receivables from clearing house, net investments, cash and cash equivalent, as well as long-term deposits with financial institutions. The decrease in assets was due to the decrease in cash, cash equivalent, long-term deposits with financial institutions and net investment at the rate of 28.82 percent and 23.51 percent, respectively; while other assets increased at a rate of 34.09 percent. Liabilities Liabilities’ structure of the Company consisted of net securities business payables, payables to clearing house and other liabilities. As at the end of 2008, the Company’s total liabilities amounted to 1,297.26 million baht, of which 1,150.71 million baht was net securities business payables or 88.70 percent of total liabilities,
a decrease of 9.30 percent from the end of 2007. Also, the Company had short-term borrowings in the amount of 50 million baht. Shareholders’ equity As at the end of 2008, the Company’s shareholders’ equity amounted to 1,808.73 million baht,
a decrease of 455.88 million baht or 20.13 percent from the previous year. The Company’s net income for the year amounted to 96.92 million baht, a decrease of 160.30 million baht from the previous year. The revaluation surplus on investment decreased by 312.80 million baht due to the impairment of investments and market price changes in investments. Also, the Company paid dividend to the shareholders in the total amount of
240 million baht. Liquidity For business operations of the Company, operating activities provided the most impact on liquidity. Cash inflow and outflow from operating activities derived from the changes of working capital in the part of securities business receivables, securities business payables, and receivables/payables from/to clearing house. For the year 2008, the Company’s net cash flow decreased by 439.34 million baht, which consisted of cash used in operating activities in the amount of 81.38 million baht, cash used in the purchase of long-term investments in the amount of 146.38 million baht and cash paid out for dividend in the amount of 240 million baht. Also, the Company had short-term borrowings from banks in the amount of 50 million baht. Operating results For the year 2008, the Company’s net income amounted to 96.92 million baht, a decrease of 160.30 million baht or 62.32 percent from the previous year. The operating results can be summarized as follows: Revenue The Company’s total revenue amounted to 954.54 million baht, a decrease of 102.72 million baht or 9.72 percent from the previous year. Revenue was mainly generated from securities and forward contract 42
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
brokerage fees in the amount of 787.40 million baht, interest and dividend income in the amount of 93.71 million baht and fees and service income in the amount of 62.31 million baht, an increase of 7.34 percent, 9.05 percent and 172.07 percent, respectively. On the other hand, gain from sales of securities decreased by
226.94 million baht due to the impairment of investments in the amount of 40.96 million baht. In the previous year, the Company had a certain amount of gain from sales of securities. Costs and expenditures For the year 2008, the Company’s costs and expenses related to business operations amounted to 800.04 million baht, an increase of 97.90 million baht or 13.94 percent from the previous year. This was due to an increase of 20.95 million baht in allowance for doubtful accounts of securities receivables and an increase of 25.49 million baht in allowance for doubtful accounts of promissory notes deposited with entities facing financial problems. For the operating expenses, personnel expenses increased by 36.13 million baht or 9.74 percent, varying with the increase of brokerage fees. Also, corporate income tax decreased by 40.32 million baht, varying with the Company’s net profit which has decreased also. Thanachart Fund Management Company Limited Management discussion and analysis of financial position and operating results for the year ended
31 December 2008 comparing to that of the year ended 31 December 2007. Financial position Assets Most of the Company’s assets were in the form of cash and deposits in financial institutions (75.36 percent of total assets). In 2008, the Company’s total assets amounted to 313.14 million baht, an increase of 6.36 million baht or 2.07 percent from 2007. From the operating results, during the year 2008, the Company paid out dividend to shareholders from the net income of 2007 in the total amount of 100.00 million baht. Liabilities Total liabilities were relatively low comparing to total assets (19.72 percent of total assets). Liabilities consisted of account payables, financial leases payables and accrued expenses. In 2008, the Company’s total liabilities amounted to 61.75 million baht, a decrease of 17.02 million baht or 21.61 percent from 2007, mainly due to corporate tax payables. Shareholders’ equity As at the end of 2008, shareholders’ equity amounted to 251.39 million baht, an increase of 23.38 million baht or 10.26 percent. The increase in shareholders’ equity was contributed by the increase in net income, after deducting a dividend payment of 100 million baht as mentioned above. Operating results In 2008, the Company’s net income amounted to 123.32 million baht, an increase of 21.33 million baht or 20.92 percent when compared to net income of 2007. Earning per share was 12.33 baht. The operating results can be analyzed as follows: Revenue As at 31 December 2008, the Company’s total revenue amounted to 444.36 million baht, an increase of 69.37 million baht or 18.50 percent once compared to total revenue as at 31 December 2007. Revenue was mainly contributed from fund management fees, registrar fees and fees from selling and buying back unit trusts in the amount of 434.40 million baht, an increase of 70.36 million baht or 19.33 percent, due to the new launched funds and the increase in net asset values. Costs and expenditures Fees and service expenses composing fees paid by the Company to supporters for the sale of unit ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
43
trusts as well as business license fees were reported at the amount of 49.74 million baht, an increase of 9.34 million baht or 23.13 percent from the previous year. Operating expenses were reported at the amount of 233.88 million baht, an increase of 45.63 million baht or 24.24 percent. This was due to the increase in expenses related to salary, special financial supports, training and seminar, premises and equipment rental, maintenance, depreciation, postal, advertisement, and sale support. Operating profit margin in 2008 amounted to 36.17 percent, a decrease of 39.03 percent from 2007. Net profit margin in 2008 amounted to 27.75 percent, an increase of 27.20 percent from 2007. Thanachart Insurance Company Limited Management discussion and analysis of financial position and operating results for the year ended
31 December 2008 comparing to that of the year ended 31 December 2007. Financial position Assets For the year ended 31 December 2008, the Company’s total assets amounted to 3,470.29 million baht, an increase of 627.79 million baht or 22.09 percent from the end of 2007. This was mainly due to the increase in investment. As at 31 December 2008, total investment assets amounted to 2,510.64 million baht,
an increase of 529.34 million baht or 26.72 percent from the end of 2007. The investment assets consisted of investments in securities in the amount of 2,207.25 million baht, and cash and deposits with banks in the amount of 303.40 million baht. Liabilities For the year ended 31 December 2008, the Company’s total liabilities amounted to 2,621.99 million baht, an increase of 492.82 million baht or 23.15 percent from the end of 2007. This was partly due to the increase of 258.24 million baht in unearned premium reserve not yet recognized as income, arising from the expansion of insurance premium income. Shareholders’ equity For the year ended 31 December 2008, the Company’s shareholders’ equity amounted to 848.30 million baht, an increase of 134.97 million baht or 18.92 percent from the end of 2007. In October 2008, the Company’s registered capitals increased from 500.00 million baht to 740.00 million baht to support its business expansion. Liquidity For the year ended 31 December 2008, the Company’s cash flows from operating activities amounted to 495.57 million baht. Cash flows from investing activities amounted to 41.15 million baht, of which 62.59 million baht was interest and dividend income, 21.45 million baht was loss on the sales of securities, and 240 million baht was cash receipt from capital’s injection. For financial liquidity in 2008, the Company’s investment policy was still to mitigate risks arising from volatilities of interest rates. As a result, it gradually reduced its long-term investments and increased its investments in short-term instruments to reduce such risk. The Company still focused on investing in instruments with high liquidity. As a result, the Company’s liquidity was relatively high for business operations. Operating results For the year ended 31 December 2008, the Company’s net income amounted to 63.37 million baht with earning per share at 1.17 baht, decreased from that of the same period of the previous year where the net income was 65.89 million baht and earning per share was 1.32 baht. The operating results can be analyzed as follows: 44
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Revenue The Company’s total revenue amounted to 2,898.49 million baht, an increase of 527.39 million baht or 22.24 percent from the same period of the previous year. Of which, revenue from the premium written was 2,851.81 million baht, an increase of 569.97 million baht or 24.98 percent from the same period of the previous year. This was due to the cooperation between Thanachart Insurance and Thanachart Bank on the expansion of retail customer base by leveraging from the Bank’s customer base. In addition, in 2008, Thanachart Insurance expanded the channels through bancassurance of the Bank and revised its strategy to expand automobile market. At the same time, the Company still provided its full attention to existing customers by improving both before and after sale services in order to create customers’ satisfaction. Consequently,
in 2008, the Company had profit from insurance underwriting amounted to 449.84 million baht, an increase
of 124.34 million baht or 38.20 percent from the same period of the previous year. Costs and expenditures The Comapy’s total indemnities amounted to 1,428.75 million baht, an increase of 248.25 million baht or 21.03 percent from the same period of the previous year. This was due to overall growth of the Company’s insurance business. Loss ratio in 2008 was at 57.55 percent, a decrease from 60.51 percent in the same period of 2007. Operating expenses amounted to 412.04 million baht, an increase of 89.00 million baht
or 27.55 percent from that of the same period of the previous year. This was due to the allocation of
the organizational resources aiming at accommodating market growth and enabling the Company to deliver quality services that cater to the needs of every group of customers and business partners. Thanachart Life Assurance Company Limited Management discussion and analysis of financial position and operating results for the year ended
31 December 2008 comparing to that of the year ended 31 December 2007. Financial position Assets As at the end of 2008, the Company’s total assets amounted to 9,050.80 million baht, an increase of 28.68 percent. This was mostly due to investments in securities in the amount of 8,017.37 million baht,
an increase of 27.84 percent from that of 2007. The investments in securities amounted to 88.58 percent of total assets and were in compliance with investment regulation stipulated by the Office of Insurance Commission (OIC). Liabilities As at the end of 2008, the Company’s total liabilities amounted to 8,159.56 million baht, an increase of 38.11 percent, mostly due to life premium reserve which increased every year. Life premium reserve accounted for 95.86 percent of total liabilities. As at 31 December 2008, the Company’s life premium reserve was 7,821.62 million baht, an increase of 39.84 percent from the previous year. According to the OIC’s requirements, life insurance companies had to set aside reserves for the life insurance policies which were still in force, so that the Company would be able to meet its financial obligations to its policy holders. Shareholders’ equity As at 31 December 2008, shareholders’ equity amounted to 891.23 million baht, a decrease of 234.13 million baht or 20.80 percent from the previous year. The Company’s return on equity (ROE) was at 31.59 percent in 2008, an increase of 18.25 percent from 2007. Operating results For operating results for the year ended 2008, the Company’s net income amounted to 350.30 million baht, an increase of 174.62 million baht or 99.40 percent comparing to that of 2007. Earning per share in 2008
was at 7.01 baht. The operating results can be analyzed as follows:
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
45
Revenue In 2008, the Company’s net premium written income amounted to 4,791.53 million baht, an increase of 1,566.00 million baht or 48.55 percent from that of the previous year. This was due to the increase in premium written for the group life insurance in the amount of 20.21 percent and the increase in ordinary life insurance
in the amount of 215.48 percent. Costs and expenditures In 2008, the Company’s underwriting expenses amounted to 4,038.23 million baht, an increase of 1,219.53 million baht or 43.27 percent from that of the previous year. Major items of expenses included the followings: Life premium reserve, calculated by actuaries which was in line with the Ministry of Commerce promulgation in relation to rules and regulations governing the provisioning of premiums as premium reserve, amounted to 2,228.20 million baht, an increase of 13.00 percent. This was due to 20.21 percent increase
in group life insurance and 215.48 percent increase in ordinary life insurance. Payments to life policy holders were reported at the amount of 1,352.08 million baht, an increase of 157.42 percent from that of the previous year. Most of the expenses, or 45.07 percent to be exact, were indemnities paid for death. In 2008, claims for death indemnities increased by 216.45 million baht or 55.08 percent comparing to that of 2007. Also, cash surrender value increased by 526.05 million baht or 3,859.03 percent comparing to that of 2007. Premium and brokerage expenses amounted to 390.25 million baht, an increase of 85.86 million baht or 28.21 percent from that of the previous year. Premium and brokerage expenses varied with the increase
in the underwriting revenue and the rate of commissions and brokerage of each policy that was different. Operating expenses amounted to 479.98 million baht, an increase of 76.01 million baht or 18.82 percent from that of the previous year. Expenses related to personnel increased by 25.93 million baht or 37.27 percent. Other operating expenses increased by 41.45 million baht or 14.14 percent, which consisted of bank’s fees, service support expenses, contributions paid to associations and institutions, stationary and office form expenses, etc.
46
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
NATURE OF BUSINESS OPERATIONS
overvieW of THE business operation
Thanachart Bank Public Company Limited “Thanachart Bank” is the company of Thanachart Financial Conglomerate with Thanachart Capital Public Company Limited “Thanachart Capital” as a parent company. The companies under Thanachart Financial Conglomerate are classified by their types of business into two groups: (1) financial business group consisting of financial institution business, asset management business, securities brokerage business, insurance business and leasing business, and (2) supporting business group consisting of brokerage business, service business, legal advisory and appraisal businesses, and training and human resource development business. The Conglomerate could be considered a fully integrated financial business group whose businesses and operations are clearly separated. As regards the distribution channels, member companies of the Conglomerate make use of the branch network and service outlets of Thanachart Bank as channels for offering their respective financial services. The arrangements are in compliance with the promotion guidelines given by the regulators concerned. The details of the business operations of each company are as follows: (a) The member companies that operate financial businesses include the following: 1. Thanachart Capital Public Company Limited operates as the holding company and thus is a parent company of Thanachart Financial Conglomerate. 2. Thanachart Bank Public Company Limited operates commercial banking business and other businesses permitted by the Bank of Thailand “BOT”, such as selling life and non-life insurance products, and underwriting and repurchasing of unit trusts. 3. Thanachart Securities Public Company Limited is granted a license from the Ministry of Finance to operate four types of businesses including securities brokerage, proprietary trading, securities underwriting and investment advisory service. As well, the company is engaged in other related businesses that support the securities business. These include, among others, financial advisory services, futures businesses, unit trust underwriting and repurchasing services as well as securities registrar. 4. Thanachart Fund Management Company Limited which is a joint venture between Thanachart Bank (holding 75 percent of the total shares) and The Government Savings Bank (holding 25 percent) operates mutual fund, private fund and provident fund management businesses. In addition, the company operates investment advisory business. As a result, it is considered a company with a full range of advisory services. 5. Thanachart Insurance Company Limited gives non-life insurance services including fire insurance, automobile insurance, marine and transportation insurance, and miscellaneous insurance. 6. Thanachart Life Assurance Company Limited gives life assurance and health insurance services. Based on the characteristics of customers, its services can be divided into two main types including ordinary life insurance and group life assurance. 7. Thanachart Group Leasing Company Limited gives automobile hire purchase loans. 8. NFS Asset Management Company Limited was granted a license to operate asset management business. It buys or takes transfers of non-performing loans from financial institutions of Thanachart Group.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
47
9. MAX Asset Management Company Limited was granted a license to operate asset management business. It buys or takes transfers of non-performing loans from financial institutions. 10. T Leasing Company Limited was granted a license to operate motorcycle hire purchase business. (B) The member companies that operate supporting businesses include the following: 1. Thanachart Legal and Appraisal Company Limited gives legal services related to contracts, legal advice, bringing cases to court of law, legal enforcement, and appraisal of collateral. 2. Thanachart Management and Service Company Limited gives staffing support services in the form of service staff. 3. Thanachart Training and Development Company Limited organizes training activities for employees of member companies of Thanachart Group. 4. Thanachart Broker Company Limited collects repayments from hire purchase customers of Thanachart Group. The company also acts as broker of insurance companies in underwriting automobile insurance policies. It is also an automobile insurance broker of Thanachart Insurance Company Limited.
shareholding structure of thanachart Group as at 3 February 2009
thanachart Capital public company limited
Financial Business Group
The Bank of Nova Scotia
commercial banking business
Non-Financial Business Group
asset management business 100%
100%
NFS Asset Management Company Limited 50.92% 48.99%
83.44%
Thanachart Bank Public Company Limited
MAX Asset Management Company Limited
Financial Business
Supporting Business 100%
100%
Thanachart Securities Public Company Limited Securities business
75%
Thanachart Broker Company Limited 100%
Thanachart Fund Management Company Limited 100%
Thanachart Management and Service Company Limited 100%
Thanachart Insurance Company Limited insurance business
Thanachart SPV 01 Company Limited
100%
Thanachart Legal and Appraisal Company Limited 100%
Thanachart Life Assurance Company Limited
Thanachart Training and Development Company Limited
100%
T Leasing Company Limited leasing business
100%
Thanachart Group Leasing Company Limited
Note: The above shareholdings include shares held by the related parties.
48
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
100%
National Leasing Company Limited
Policy on Division of Operational Functions among Member Companies of Thanachart Group Being a parent company of Thanachart Financial Conglomerate with a controlling interest (i.e. owning more than 50 percent of issued and paid-up capital), Thanachart Capital has adopted the following policies and approaches in managing the member companies of the Group. Business Policies Thanachart Capital and Thanachart Bank is responsible for establishing key business policies of Thanachart Group annually. Each subsidiary is required to formulate business plans and budgets for three-five years and submit them to the parent company for consideration, in order to ensure that they are in alignment with the established key business policies. The business plans and budgets are also subject to evaluation and review every six months. The objective is to ensure that they are in line with the changing business conditions. Supervision of Subsidiaries The directors and high-ranking executives of Thanachart Capital and Thanachart Bank will be assigned to sit on the Board of Directors of the subsidiaries. The arrangement not only enables Thanachart Capital and Thanachart Bank to assist the subsidiaries in establishing their policies and in determining their future direction, but also ensures the close supervision of the subsidiaries’ business operations. Importantly, the managing directors of the subsidiaries are required to present a monthly performance report to the Executive Committee and the Board of Directors of Thanachart Bank and Thanachart Capital. Centralized Support Services It is the policy of Thanachart Group to put each of the support services together in one company which will be responsible for providing services to all other member companies of the Group. The purpose is to maximize benefits within the existing resources including expertise of operations staff and various information technology systems, and to reduce staffing costs. The centralized support services available now within Thanachart Group include information technology, personnel, systems and regulatory development, internal audit, operations control, operations, business control, electronic services, administration and procurement, legal and appraisal services, as well as retail debt collections and collections brokerage. Internal Control, Audit and Corporate Governance of Parent Company and member companies of thanachart group Thanachart Group places strong emphasis on internal control. The Group adheres to the principle of adequate and appropriate internal control by establishing procedures for the conduct of business, provision of services, and operations. The Group also separates the duties and responsibilities of each unit from those of others, based on a system of checks and balances. In addition, it puts in writing the announcements as well as order mandates, rules and regulations covering key business areas and operations and these information is also disclosed to all staff in such a way that they can always study them in order to gain a full understanding. A central unit at Thanachart Bank is responsible for preparing and proposing for the announcements, order mandates, rules and regulations of all member companies of the Group. As regards the internal audit, the internal audit group is responsible for auditing the business operations of all member companies of the Group, ensuring that they comply with the regulations and the established work systems. The internal audit group also assesses errors and defects in operations in order to propose corrective measures for improvement. In addition, Thanachart Group has established a compliance unit responsible for closely monitoring and studying laws, notifications, and orders related to the Group’s business affairs and operations and disseminating the information to the staff. The compliance unit is also responsible for ensuring that the conduct of business affairs of the member companies of the Group is in compliance with the legal requirements.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
49
Moreover, the Audit Committee of each member company of the Group is responsible for governing, controlling and auditing their respective business operations. The Audit Committee is also allowed to carry out its duties and give its opinions in a manner independent of the management of each company. The purpose is to ensure that internal control and audit systems are effective and that the financial statements are properly reviewed. As regards the corporate governance, the Boards of Directors of the parent company and the companies in the Group place strong emphasis on the good corporate governance both at the level of the Board of Directors and the level of various committees. Independent directors are appointed to the Board of Directors and the committees to provide effective checks and balances on the powers of executive directors. The established scope of responsibilities of the Board of Directors and the committees is also in line with the principles of good corporate governance promoted by the authorities concerned. In addition, the Boards of Directors of the parent company and the subsidiaries have established the corporate governance policy and the code of conduct which the directors, executives and staff of the member companies of Thanachart Group are required to adhere to. Focus is given to integrity, transparency and avoidance of any conflict of interest. Risk Management Thanachart Capital ensures that the member companies of the Group analyze and assess various risks of their business operations and that the risks are properly managed in line with the guidelines given by the authorities concerned. In addition, Thanachart Capital conducts analysis of the key risks faced by the member companies of the Group which may need direct financial or management support from Thanachart Capital. The established risk management policy of Thanachart Financial Conglomerate is in line with the guidelines given by the BOT. Income Structure of Thanachart Bank and its subsidiaries The income structure of Thanachart Bank and is subsidiaries based on the consolidated financial statements as of 31 December 2008 and 2007 is as follows: Consolidated Financial Statements Percentage Shareholding of 2008 2007 Thanachart Bank Million (with Related Parties) Million Percent Percent Baht Baht
Interest and dividend income
19,488
88.62
17,051
120.05
100.00
110
0.50
42
0.30
75.00
7
0.03
3
0.02
Thanachart Insurance Company Limited
100.00
73
0.33
29
0.20
Thanachart Life Assurance Company Limited
100.00
287
1.31
84
0.59
Thanachart Group Leasing Company Limited
100.00
466
2.12
238
1.68
Thanachart Broker Company Limited
100.00
1
0.01
1
0.01
Thanachart Management and Service
Thanachart Legal and Appraisal Company Limited
Thanachart Training and Development
T Leasing Company Limited
Thanachart Bank Public Company Limited
Thanachart Securities Public Company Limited
Thanachart Fund Management Company Limited
Company Limited
Company Limited
100.00
-
-
-
-
100.00
-
-
-
-
100.00
-
-
-
-
100.00
253
1.15
20
0.14
100.00
3
0.01
20
0.14
Total interest and dividend income
20,688
94.08
17,488
123.13
National Leasing Company Limited
50
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Consolidated Financial Statements Percentage Shareholding of 2008 2007 Thanachart Bank Million (with Related Parties) Million Percent Percent Baht Baht
Interest expense
Thanachart Bank Public Company Limited
9,376
42.64
9,364
65.93
Thanachart Securities Public Company Limited
100.00
3
0.01
1
0.01
Thanachart Fund Management Company Limited
75.00
-
-
-
-
Thanachart Insurance Company Limited
100.00
-
-
-
-
Thanachart Life Assurance Company Limited
100.00
-
-
-
-
Thanachart Group Leasing Company Limited
100.00
9
0.04
23
0.16
Thanachart Broker Company Limited
100.00
-
-
-
-
Thanachart Management and Service
100.00
-
-
-
-
Thanachart Legal and Appraisal Company Limited
100.00
1
0.01
-
-
Thanachart Training and Development
100.00
-
-
-
-
T Leasing Company Limited
100.00
-
-
-
-
National Leasing Company Limited
100.00
9
0.04
8
0.06
Total interest expense
9,398
42.74
9,396
66.16
Net interest and dividend income
11,290
51.34
8,092
56.97
Company Limited
Company Limited
Non-interest income
Thanachart Bank Public Company Limited
2,013
9.15
1,914
13.48
Thanachart Securities Public Company Limited
100.00
793
3.61
479
3.37
Thanachart Fund Management Company Limited
75.00
435
1.98
215
1.51
Thanachart Insurance Company Limited
100.00
2,502
11.38
1,088
7.66
Thanachart Life Assurance Company Limited
100.00
4,681
21.28
2,282
16.07
Thanachart Group Leasing Company Limited
100.00
70
0.32
46
0.32
Thanachart Broker Company Limited
100.00
94
0.43
45
0.32
Thanachart Management and Service
100.00
1
0.01
1
0.01
Thanachart Legal and Appraisal Company Limited
100.00
52
0.24
29
0.20
Thanachart Training and Development
100.00
-
-
-
-
T Leasing Company Limited
100.00
49
0.22
5
0.04
National Leasing Company Limited
100.00
10
0.04
7
0.05
Total non-interest income
10,700
48.66
6,111
43.03
Net interest and dividend income
21,990
100.00
14,203
100.00
Company Limited
Company Limited
and non-interest income
Note: The Bank discloses the investment policy under the topic of assets used in business operation.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
51
Income structure of Thanachart Bank based on separated financial statements of the year ended 31 December 2008, 2007 and 2006 is as follows: 2008
Interest and dividend income Interest expense Net interest and dividend income Non-interest income
2007
2006
Million Baht
Percent
Million Baht
Percent
Million Baht
19,897
156.01
17,123
175.77
15,520
211.79
9,429
73.93
9,386
96.35
9,510
129.78
10,468
82.08
7,737
79.42
6,010
82.01
2,286
17.92
2,005
20.58
1,318
17.99
12,754
100.00
9,742
100.00
7,328
100.00
Percent
Net interest and dividend income
and non-interest income
Nature of Business Operation of Each Business Group Business Policy and Strategies of Thanachart Group In 2008, Thanachart Group determined its strategic direction in becoming a fully integrated financial services group that is capable of offering quality products and services that cater to the financial needs of the targeted groups of customers in an efficient manner. To move in the right strategic direction, Thanachart Group has come up with a vision based on the fully integrated financial services group with details as follows: Vision “Be a business group that offers fully integrated financial services with focus on creation of service excellence and development of various products that cater to all the financial needs of its target groups of customers, with the cooperation and solidarity of all the members of the group.” Such vision is based on three major fundamentals. The first fundamental is the business group which has fully integrated financial services with Thanachart Bank being the main channel for offering the services. The second one is the ability to cater to customers’ needs (customer centric) while the third one is the cooperation received from all the work units as well as the unity among them (synergy). Moreover, the efforts based on the three major fundamentals will not only help Thanachart Group to become a successful financial institution with fully integrated financial services, but will also be a key driver in making the Group become one of Thailand’s leading mid-sized banks over the next five years. In addition to the goal of becoming a fully integrated financial services group, Thanachart Group has set itself a goal of becoming a leading mid-sized bank in the country’s commercial banking industry through organic growth, i.e. having an asset size suitable for business competition and achieving financial performance at the same level as the average of the commercial banking industry. As a result, Thanachart Group places strong emphasis on expanding its retail customer base. Currently, the Group is quite well prepared and has a competitive advantage. It has also diversified its risks by placing more emphasis on corporate loans and SME loans. The objective is to provide its customers with more alternatives and to expand Thanachart Group’s client base. Moreover, with the support of The Bank of Nova Scotia “Scotiabank”, Thanachart Group developed fee-based income business by promoting cross-selling. The objective is to increase the fee-based income of Thanachart Group. The Group has communicated these goals to the staff throughout the organization in the form of five strategic intents with the details as follows: 1. To maintain the market leader position in hire purchase business. 2. To diversify the risk of its business loan portfolios by placing more emphasis on corporate loans and SME loans as well as retail loans, mortgages and credit card business. 52
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
3. To increase income base in interest income through loan expansion and in non-interest income through offering new services including trade finance, treasury management and credit card business. 4. To achieve the “best-in-class” customer service. 5. To reduce the cost of fund by expanding the savings depositor base. To also reduce the operating cost to income ratio and the non-performing loans. Being in line with the vision and strategies established by Thanachart Group, the above strategic intents are communicated to all staff at all levels so that they all share the same determination. In order that the strategies are in alignment, efficiently measurable and able to control the organization systematically, Thanachart Group has developed a long term plan entitled “CEO’s Six-point Agenda” which serves as a key tool in controlling the key business plans of all the business units of the Group. The CEO’s Six-point Agenda includes: Agenda 1: To strive to meet or exceed long-term financial targets. • The consolidated assets of Thanachart Bank and its subsidiaries increased by 25.79 percent from 300,787 million baht in 2007 to 378,347 million baht in 2008. The return to equity amounted to 10.40 percent while the return to asset amounted to 0.79 percent. Agenda 2: To accelerate the development of new products and expand the business base (growth initiatives) as well as pursuing quality excellence with focus given to development of products and expansion of distribution channels into areas that cater to the needs of the target groups of customers. • In 2008, Thanachart Group continued to develop new products that catered to the needs of its target groups of customers (customer segmentation). The Group placed emphasis on developing a wide range of products, bundling up the products of the subsidiaries and offering the products to customers so that they had more alternatives. As part of its efforts to develop new products in a continuous manner, the Group received strong support from Scotiabank in many areas such as trade finance, treasury business, credit card business and electronic business. The support would enable Thanachart Group to offer products on par with those of the leading banks in the future. • Under the distribution-led strategy which aims at expanding the distribution channels to reach the target groups of customers in all areas so that it has more channels to service its customers, Thanachart Group placed strong emphasis on opening of new branches nationwide. The branches are its main distribution channels. It managed to increase the number of the branches by 3.26 percent from 166 branches in 2007 to 213 branches in 2008, which ranked 8th in the commercial banking industry. • In addition, Thanachart Group placed strong emphasis on expansion of its distribution channels in the form of ATMs. Under the “ATM Connect” Agreements with its business alliances including Krung Thai Bank and Siam City Bank, Thanachart Group was able to expand its ATM network to serve its customers nationwide. • Thanks to the product development and distribution-led strategies, the better understanding of its customers, as well as the cooperation from all the executives and staff, Thanachart Group managed to grow its customer base by 30.37 percent in 2008. Agenda 3: To put in place basic infrastructure systems and key supporting systems that facilitate the efficient business operations (operational improvements). These include the development of basic infrastructure systems and operational systems of Thanachart Group with standards on par with all the best practices. • Thanachart Group’s installation of basic infrastructure systems is a very important function that helps accommodate the business expansion in line with the Group’s vision. In 2008, Thanachart Group succeeded in installing new work systems which enhanced the efficiency of its services and helped cut the operational cost per transaction. These systems included, among others, new deposit system, treasury system, trade finance system, credit card system, collection system, general ledger system, human resource information system, and Oracle Financial Service Application (OFSA). They are key systems that not only help enhance the effectiveness and efficiency of the current business operations, but also are beneficial to the Bank’s future business expansion. ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
53
• The developments under the new operating business model proceeded without any interruption. These included the organizational restructuring in line with the customer-centric approach, the increase in the number of branches, the process reengineering with focus on the end-to-end process which is aimed at enhancing the customer services, as well as the development of a data management system which analyzes the information, promotes a better understanding of customer needs, increases the quality of branch services, and enhances the efficiency of operational cost management. The major projects in 2008 included, among others, restructuring of large industrial loans, reengineering the process of delivering services to customers at branches, establishment of printing center and establishment of custodian and trustee business. • In developing the quality of its services, Thanachart Group has established guidelines on branch service best practice for all the branches nationwide. The objective is to ensure that the quality standards of services given by the branches are the same. A customer satisfaction survey in 2008 showed that the score of its branch services increased from 3.21 to 3.45, based on a full score of 5. Agenda 4: To build a proactive work culture and enhance the knowledge and skills of staff in the organization (people development) with focus given to new culture of working and creation of “new DNA” for staff at all levels. • To build a proactive work culture and support the culture of collaboration. The objective is to bring about unity among staff in the organization and to integrate the work culture of Thanachart Group with the work culture of its business alliances. • To succeed in integrating the work culture of Thanachart Group with the work culture of its alliance and to succeed in creating a new knowledge base (know-how) with the support of Scotiabank. In 2008, seven of Scotiabank’s senior executives took up key positions within major work units of Thanachart Group. Giving support to the development of innovative work process and sharing their experience and corporate knowledge, they played an important role in changing the corporate culture of Thanachart Group. • To make Thanachart Group a learning organization, encouraging all staff to share knowledge with one another (knowledge sharing), promoting communication between supervisors and their subordinates as well as between work units (knowledge transfer), organizing seminars with qualified experts being invited to share their knowledge (know-how) with staff. • To enhance the potential of human resources (people capabilities) by organizing continuous staff training activities in new areas of knowledge. The training projects included, among others, training activities for middle-and high-level executives, strategic training and leadership training. In 2008, there were altogether 156 programs (or 395 sessions in total) organized for enhancing the potential of the staff. The training subjects covered the areas of staff development in line with Thanachart Group’s established vision. Agenda 5: To conduct the business affairs in compliance with the regulations of the authorities concerned and to adhere to the principles of good corporate governance which cover risk management, general governance, internal audit, rules and regulations, as well as establishment of the Code of Ethics which serves as standard guidelines for staff in the organization. • The staff in Head Quarter and nationwide network are educated to understand the principles of good corporate governance and corporate social responsibility systematically in order to apply in the operation. This will enhance a more international standard on the good corporate governance and in the corporate social responsibility activities of Thanachart Group that truly benefit society and environment. Agenda 6: To disseminate the positive image and good reputation of the organization to the target groups of customers and investors (public relation and communication). • Throughout 2008, Thanachart Group organized continuous public relations activities that aimed at promoting the positive image of the organization through various media including TV, radio, magazines and printed materials. They also included promotional activities for each product, the objective of which was to build a positive image and introduce new product or service to prospective clients.
54
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
• Thanachart Group places strong emphasis on internal communication aimed at disseminating success stories and important activities of Thanachart Group to the staff so that they feel proud of their organization and become an integral part of Thanachart Group. The internal communication also includes communication between supervisors and their teams, communication between work units as well as communication between business units. In 2008, Thanachart Group attained the following goals in line with the five strategic intents. 1. The Group succeeded in maintaining the market leader position in hire purchase business. In 2008, Thanachart Group’s market share in the new and used car hire purchase industry amounted to about 25 percent. 2. The Group succeeded in diversifying the risk of its business loan portfolios. In 2008, Thanachart Group’s corporate loans increased from 11.7 percent to 18.0 percent of the total loan portfolios. On the other hand, its hire purchase loans decreased from 81.2 percent to 77.1 percent. The developments helped Thanachart Group diversify the credit risk and interest rate risk more efficiently. 3. The Group succeeded in increasing its profitable revenue. While the interest income from the loan growth increased by 31 percent, the non-interest income from its new fee-based businesses including trade finance, treasury business and cross-selling activities among the member companies of Thanachart Group increased by 11.8 percent. 4. The Group succeeded in achieving the ‘best-in-class’ customer service. The achievement was based on the introduction of the branch service best practice to all of its branches nationwide for implementation. A customer satisfaction survey in 2008 showed that the score of its branch services increased from 3.21 to 3.45, based on a full score of 5. 5. However, in 2008, Thanachart Group was faced with the increase in the operational costs as a result of investment in the basic infrastructure, which was higher than the increase in the fee-based income. The operating cost after deducting insurance underwriting expense amounted to 59.72 percent, a decrease from the previous year. The customer base grew by 30.37 percent. Note: The calculation of the market share was based on information collected from the hire purchase industry as at 31 December 2008.
In view of the goals attained in 2008 in line with the strategic intents, Thanachart Group is determined to enhance further the effectiveness and efficiency of its business operations. In 2009, the Group will proceed with the various activities in order to attain the established goals under the strategic intents. Nature of Business Operations of Each Business Group Commercial Banking Business Characteristics of Services Thanachart Bank operates its businesses in compliance with the Financial Institutions Businesses Act and other relevant notifications issued by the BOT. Among others, the Bank also acts as an advisor for investments in unit trusts and securities trading account opening, a life insurance brokerage agent, a financial advisor, an agent for bondholders, and a custodian. As at 31 December 2008, the Bank had in total 213 branches (excluding the headquarters), 377 ATMs (both in-branches and stand-alone), 3 CDMs (cash deposit machines), 76 foreign exchange booths, 57 of which are in-branches, as well as 19 foreign exchange offices. Product and service group Thanachart Bank improves and develops products that can cater to the customer needs better. Its main products include deposits, loans, electronic services, securities business-related products, insurance policies, and leasing products.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
55
Group 1 Deposit Products Thanachart Bank offers deposit products to customer groups, both retail and corporate, through its service outlets. It has four major types of deposit products including savings deposits, fixed deposits, current deposits, and foreign currency deposits. Competitive Strategies As at the end of 2008, the Bank’s total deposits amounted to 270,163 million baht, an increase of 81,503 million baht from 2007. This was mainly due to the increase in savings deposits and fixed deposits with maturity of three-nine months, as a result of the Bank’s successful strategy which placed emphasis on development of a wider range of new products for customers to choose from. The strategy was supported by proactive marketing activities and advanced information technology systems. In addition, the product package was promoted to new target groups of customers through product bundling, cross-selling and up-selling. The Bank also organized marketing activities as well as sale promotion activities aimed at customers of fixed and savings deposits. The objective was to expand the depositor base to cover new target groups of customers, based on the analysis of the needs of each group of customers. For example, its “cash-to-gold” deposits attracted a lot of interest from new customers with 3-month fixed deposits. In addition, the Bank put in place adequate marketing staff to provide the customers with suggestions, advice and financial planning. The objective was to gain a full and correct understanding of customer needs. The Bank’s products were offered through various distribution channels including Money Expo, the bank’s branch network, electronic channels, sales and marketing teams. The products were also offered through the branch networks, marketing teams, ATMs and CDMs (Cash Deposit Machines) of the Bank’s business alliances. Group 2 Lending Products Thanachart Bank’s lending products can be divided into five categories including personal loans, SME loans, corporate loans, hire purchase loans and trade finance. 1. Automobile Hire Purchase Loans Thanachart Bank gives hire purchase loans to both individual and juristic clients with focus given to loans for new and used cars. Currently, the Bank is a market leader in the automobile hire purchase business. And after the BOT allowed the Bank to operate sale and leaseback transactions, the Bank started offering the sale and leaseback services under the product called “Cash Your Car”. This product was in response to consumers who needed cash in a loan amount appropriate to the car conditions, with an interest rate which was lower than other types of personal loans. The Bank also had other car-related projects such as the NGV loan project which was jointly supported by Thanachart Bank and Petroleum Authority of Thailand (PTT). Under the project, the Bank gave loans at a low interest rate for installing NGV equipment and tank, in line with the promotion to reduce the use of crude oil. The main distribution channel for the hire purchase loans was the sale teams both in Bangkok and in the upcountry. Competitive Strategies As the Thai economy was continuously faced with negative factors in 2008, Thanachart Bank developed strategies for different areas related to the hire purchase loans. In relation to pricing, it was the Bank’s policy to offer a competitive price in the market. The Bank also made the terms of its hire purchase loans more flexible within the limits established. As regards the services, the Bank streamlined the loan process, starting from the meeting with the customer and credit analysis, after which the customers would be promptly informed of the loan application results. In addition, the Bank placed emphasis on after-sale services in order to build a good relationship with its customers. In relation to sales promotion, the Bank organized sales promotion activities jointly with the car dealers. The objective was to maintain the existing market share and to find a new way to gain a larger market share, such as working with the new and used car dealers in launching joint campaigns. The Bank also established relationships with the auto manufacturers’ companies which gave hire purchase loans. On the relationship with the customers, the Bank established a number projects aimed at providing the existing customers with more services such as improvement of the call center in order to be able to 56
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
give services to more customers. Moreover, the Bank made arrangements to provide the customers with complete information about the products as well as obtaining suggestions and comments from the customers, the information of which would enable the Bank to find solutions to their problems. As well, the Bank conducted a customer’s satisfaction survey and the dealer’s satisfaction survey at least once a year. On marketing, the Bank adopted a market penetration strategy aimed at gaining a larger market share of the automobile hire purchase business. It invited the customers who had used the Bank’s services before, to get a hire purchase loan from the Bank again to buy their second car. Special privilege would be given to the existing customers who had a good repayment record. In addition, Thanachart Bank focused its marketing efforts on the customers using the hire purchase services of other companies as well as those who had never used the hire purchase services before, such as individual or corporate clients who purchased their cars by cash. 2. Corporate Loan Products In order to cater to the customer needs in an efficient manner, the Bank first develops products that are suitable to the real needs of the customers, after which it determines the line of credit, the interest rate and the repayment period which are in line with the cash in-flows and the customer’s use of the approved credit line. The Bank’s loan products include the following: 1. Term loan facility which is suitable for customers who have long-term financial needs, i.e. for more than one year with clear financial objective, e.g. capital expenditure to build a factory, business expansion, purchases of machineries and equipment, and etc. 2. Working capital facility which is suitable for customers who have short-term financial needs i.e. for no more than one year which will be used as their working capital or for enhancing their liquidity position e.g. loans for raw material purchase, inventory management and etc. Such financial services include overdraft line or promissory notes. The customers can withdraw loans as they wish but their credit lines and creditworthiness will be subject to annual review by Thanachart Bank. 3. Aval/guarantee facility which is suitable for customers who need it for a guarantee with trade partners e.g. bidding for projects, construction guarantee, utility guarantee and etc. 4. Trade finance which is suitable for customers who operate import and export businesses. Thanachart Bank has various trade finance products that completely match customers’ needs e.g. Letter of Credit (LC), Shipping Guarantee (SG), export loans, international money transfer and etc. Apart from such main loan products, Thanachart Bank has established an investment banking department. Being responsible for providing the customers with financial advice as well as business loan services, the investment banking department acts as a total solutions provider for the customers. As part of its services, the department assists the customers in mobilizing funds from the capital market. It can also help identify funding sources, manage liquidity and give other support, taking advantage of Thanachart Bank’s business alliance network and its relationship with other member companies of Thanachart Group. The Bank divides corporate finance customers into 3 groups as follows: 1) Large scale businesses which are the group of customers with annual sales revenue of over 1,000 million baht. As the financial needs of this group of customers are more complex and numerous, the Bank has established special teams which communicate directly with this group of customers. This enables the Bank to cater to their specific needs in an efficient manner and to design financial products that are suitable to their needs. 2) Medium-sized businesses including the group of customers with annual sales revenue of over 300 million baht who are located in Bangkok and its vicinity and intend to get a loan worth more than 50 million baht from Thanachart Bank, as well as the group of customers with annual sales revenue of over 200 million baht who are located outside Bangkok and its vicinity and intend to get a loan worth more than 25 million baht. 3) Small scale businesses which include the group of customers with annual sales revenue of less than 300 million baht who are located in Bangkok and its vicinity and intend to get a loan worth less than 50 million baht from Thanachart Bank as well as the group of customers with annual sales revenue of less than 200 million baht who are located outside Bangkok and its vicinity and intend to get a loan worth less than 25 million baht.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
57
Competitive Strategy The competitive strategy focuses on providing the customers with fully integrated financial services that cater to the customer needs in all areas. Thanachart Bank has established a product development division for corporate customers. The department is responsible for designing products and services that meet the needs of the customers in a most efficient manner. As well, the Bank has invested in credit systems and streamlined the internal work process, ensuring that they are shorter and more flexible. The objective is to give services to the customers more efficiently. The improvements have greatly impressed the customers. Focus is given to large and medium scale customers with strong performance, particularly those in the target sector in Bangkok and in the upcountry. Focus is also given to expansion of the client base to cover supply chain of the target customer groups. 3. Loan Products for Automobile SMEs The Bank has developed loan products for automobile SMEs who have short-term financial needs with the proceeds of the loans to be used as their working capital or for enhancing their liquidity position as well as those who have long-term financial needs with the proceeds of the loans to be used for business expansion. The Bank will also offer other financial services to this group of customers. These include, among others, guarantee/avals and trade finance. The target customer groups include new car dealers, used car dealers, public transportation operators, car rental operators as well as operators of automobile-related businesses. The loan products are offered through the Bank’s branch network nationwide. Competitive Strategy Although the automobile industry in 2008 was adversely affected by the economic slowdown and the political uncertainties, Thanachart Bank continued placing emphasis on maintaining good relationships with its customers by fulfilling their needs, such as providing the customers with advice on financial and business planning. Moreover, Thanachart Bank continues developing loan products that incorporate other financial services, ensuring that the customers have the line of credit and products that match their financial needs as well as the financial structure that is appropriate to their business operations. In addition, Thanachart Bank places strong emphasis on streamlining the internal management systems, such as delegating loan approval authority by making use of the credit scoring techniques as a main tool in screening and approving applications for standard loan products. The tool helps shorten the loan approval process. The Bank has also developed credit operations procedures and systems, making use of information technology in collecting data. As a result, the systems become more efficient and the database management becomes more systematic. 4. Personal Loan Products In order to be able to cater to the needs of different target customer groups in a most efficient manner, Thanachart Bank has developed a wide range of personal loan products, from which the customers can choose. These include, among others, mortgage loans under the brand of “Smart Home” for residential projects and residential condominiums, as well as home loan refinance that replaces the current mortgage with another financial institution. Another product for the purpose of personal consumption is the multi-purposed loan with or without collateral. The product called “My Cash” is designed for customers whose salaries are paid through their bank accounts with Thanachart Bank. “Wish-list” loans are credit lines given to the hire purchase customers with good repayment records. In addition, the Bank makes available education loans under the name called “Scholar Loan” which are for the customers who want to use the proceeds of the loans for financing the undergraduate and graduate level education. Competitive Strategy In the past year, both commercial banks and non-banks still used the pricing strategy in promoting sales of their products and services. In this connection, Thanachart Bank took into consideration the risk involved and the rate of return that was acceptable to the Bank. As a result, it placed emphasis on giving loans to the target customer groups with good potential. It also placed emphasis on efficient service delivery and on offer of fully integrated products that catered to all customer needs. The sales strategy focused on offer of the Bank’s various products such as insurance, life assurance, and mutual funds. The main distribution channels included the Bank’s branch network and direct sales teams. 58
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
5. Trade Finance Products Thanachart Bank offers integrated financial services for trade finance. These include, among others, issuance of import letters of credit (Import L/C), acceptance of trust receipt (T/R), packing credit, buying or buying at discount bills (export bill negotiation), issuance of standby letters of credit (Standby L/C), and issuance of letters of guarantee. Competitive Strategy In the 2008, the international trade, particularly the export sector, was adversely affected by the global economic downturn. On domestic competition, most customers made use of trade finance products offered by large-sized commercial banks. However, the performance of Thanachart Bank in 2008 was quite satisfactory with the continuous growth of fee-based income. To be able to compete with other banks in an efficient manner, it focuses on development of products that were accurate and efficient, as well as competitive interest rates and fees which are key factors in attracting customers to make use of its trade finance services. In this connection, Thanachart Bank places emphasis on the overall income to be gained from the customers’ transactions and the creation of the client base. Its target customer groups include large and medium scale corporate clients as well as retail clients. The large scale corporate clients serve as prospect to establish customer base and extend its network to foreign countries worldwide, while the medium scale clients and retail clients serve as a base to build Thanachart Bank’s income. Group 3 Electronic Products and Services Thanachart Bank offers electronic products and services that enable financial transactions of its customers to be processed in a more efficient manner. These services include fund transfer service, automatic transfer service (ATS), online settlement for financial transactions through the Bank of Thailand’s Automatic High-Volume Transaction Network (BAHTNET), automatic money transfers between banks (SMART) and bill payment service through various channels e.g. counters, ATM, IVR, Internet and Mobile. In this regard, Thanachart Bank has set all procedures according to the rules and regulations of the BOT 1. Automatic Transfer Service (ATS) An automatic transfer service enables the customers to transfer money to a number of transferees who have savings or current accounts with Thanachart Bank nationwide. This service is in response to customers’ needs in executing a large number of transfer transactions by issuing only one instruction in form of “one-to-many”. Types of available services include payroll for paying salary, bonus and dividends, ATS Credit for paying for goods to a large number of receivers, and ATS Debit for automatically deducting payment of goods from a large number of payers. The customers can also use ATS services via diskette, modem and Internet. 2. SMART (Credit) is a service for transferring money to a large number of retail receivers that have savings or current accounts with other banks. The service is in response to customer needs in executing a large number of transfer transactions by issuing only one instruction in form of “one-to-many”, e.g. to pay for goods and services, salary, bonus, dividend and etc. The customers can also use SMART services via counter and Internet. 3. Fund Transfers Other money transfer services between Thanachart Bank and other commercial banks include normal fund transfers, money transfers to third party, automatic money transfers between savings and current accounts (Sweep), small volume money transfer between banks (Online Real-time Fund TransferORTF) and large volume money transfer between banks (BAHTENET). 4. Sweep Account Service (Cash Link Account) This type of service offered by Thanachart Bank represents another channel for greater convenience of its customers in transferring fund between savings and current accounts. 5. Interbank Transfer/Online Real-time Fund Transfer (ORTF) This inter-bank transfer service enables customers to make fund transfers from Thanachart Bank’s counter to savings or current accounts of third party with other banks nationwide. ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
59
6. BAHTNET This type of service is for customers who want to transfer their money from Thanachart Bank to other banks or financial institutions or for those who want to accept the money transfer from other banks or financial institutions to their accounts at Thanachart Bank. Such transfers, effective within that day, are suitable for customers who need an immediate transfer of a large amount of money. 7. Bill Payment Services The bill payment services are for companies that need to accept installment payments for their various products or services in form of “many-to-one”. The services provide their customers with convenience. Payers can also make payments at Thanachart Bank’s counters across the country or through Thanachart Bank’s electronic channels. Payment acceptance reports are available to the companies on the next business day. 8. Easy Cash Transfer This service is for transferors and transferees having no account with Thanachart Bank. With the service, cash can be transferred from one of Thanachart Bank’s counters to another across the country. The service represents another fund transfer channel for customers who have no deposit account with the Bank. 9. Automated Teller Machines (ATMs) and Cash Deposit Machines (CDMs) Thanachart Bank continued to speed up installation of Automated Teller Machines (ATMs) in Bangkok and its vicinity. As at 31 December 2008, the total number of its ATMs was 377. With ATM card, Thanachart Bank’s depositors can enjoy a host of banking services round-the-clock via the Bank’s ATMs and those of other banks which are members of National ITMX Company Limited (Interbank Transaction Management and Exchange - ITMX). The available services include cash withdrawals, balance inquiries, bill payments, and more. As regards the Cash Deposit Machines (CDMs), as at 31 December 2008, it had three CDMs. Moreover, in order to enhance its services, Thanachart Bank has included cash withdrawal services via Visa International’s credit cards. Thanachart Bank’s ATMs are thus able to give services to holders of Visa/Plus credit cards and Visa Electron debit cards. Moreover, in 2008, Thanachart Bank introduced a new service called “ATM Connect” for greater convenience of its customers. The service enables holders of Thanachart Bank’s ATM cards to enjoy banking services via over 4,000 ATMs of Krung Thai Bank as well as over 1,600 ATMs of Siam City Bank nationwide. Competitive Strategies Thanachart Bank has developed electronic systems for all channels, which not only result in greater convenience for customers but also bring about services that are safer and more efficient. Moreover, the Bank has developed electronic systems for giving services via cell phones and Internet. With the services, customers can execute financial transactions themselves without having to visit Thanachart Bank. The services greatly help save expenses and time. 1. The competitive strategy focuses on appropriate fee pricing and sales promotions including cross-selling and up-selling. In the areas of corporate clients, the Bank has adopted a “loss-leader” strategy for services in which the businesses or the firms are interested. Using the strategy, the Bank can propose its services to both small and large scale companies. 2. The Bank increases the promotion campaign to attract the customers while the product and service channel are developed to cover the needs of each customer group. 3. The Bank places emphasis on easy accessibility and services that are efficient and without complicated procedures. 4. The Bank gives a higher line of credit than other banks. Customers can draw down the loan on the date when the transaction is executed. 5. As additional service outlets, Thanachart Bank opens branches in shopping centers to provide its customers with greater convenience.
60
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Group 4 Other Services 1. Foreign Exchange Services Thanachart Bank’s services include foreign exchange services in form of bank notes and traveler checks; money changers; receipt of foreign currency transfers into the country for payments of goods or for transfers into personal accounts; foreign currency transfers out of the country for payments of goods or for transfers into personal accounts; and opening of Foreign Currency Deposit (FCD) accounts and etc. Competitive Strategy Apart from its services which are friendly, efficient and accurate, Thanachart Bank offers better exchange rates in order to expand its new customer base and to maintain the existing customers. Focus is given to selection of strategic areas for business operations in order to get maximum market share. Thanachart Bank’s target customers include tourists and foreign businessmen working in Thailand, as well as corporate clients in business sectors such as hotels and tourism, whose businesses use foreign currencies. As at 31 December 2008, there were a total of 76 foreign exchange service points, both stand-alone and in-branch. Of the service points, 40 were located in Bangkok and 36 in other provinces. 2. Bills of Exchange Thanachart Bank issues bills of exchange as a means of borrowing money from the public and as another savings option for the public. To provide the customers with greater convenience, Thanachart Bank has also made the bills of exchange available at all its branches nationwide. Competitive Strategy Thanachart Bank offers a higher rate of return for the bills of exchange than the interest rates offered for fixed deposits with the same maturity. Its customers consist of both individual and corporate clients who have knowledge and experience in investing in debt instruments and accept the Bank’s credit risk. Meanwhile, the Bank develops its products and services with the support of modern technology systems. 3. Bondholder Representative Services The main responsibilities and duties of the bondholder representatives are to oversee and protect all rights of its bondholders in compliance with the terms and conditions of any debenture issuance as well as the notifications issued by the Office of the Securities and Exchange Commission “SEC”. Thanachart Bank is well-equipped to act as an agent providing this service, which includes following up and ensuring that the performance are in compliance with terms and conditions under the Issuer Agreement and overseeing the assets that are pledged as collateral. Thanachart Bank has provided the bondholder representative services since the latter part of 2005. The business was transferred from National Finance Public Company Limited, whose name had been changed to Thanachart Capital Public Company Limited “Thanachart Capital”, to Thanachart Bank. Together with financial advisors, Thanachart Bank offers this service directly to the issuers of the bonds. So far, Thanachart Bank has reasonably gained trust from its customers. Competitive Strategy In view of the prevailing conditions, Thanachart Bank has placed emphasis on giving convenient and quick services with competitive fees. Products of Securities Business Thanachart Bank also offers products of securities business consisting of two types of business including brokerage business which is managed by Thanachart Securities Public Company Limited and mutual fund management business which is managed by Thanachart Fund Management Company Limited.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
61
Brokerage Business The brokerage business covers four areas of business including securities brokerage, proprietary trading, securities underwriting and investment advisory services. As well, there are other related businesses that support the brokerage business. These include, among others, financial advisory services, futures business, unit trust underwriting and repurchasing services as well as securities registrar. As at 31 December 2008, it had 30 branches in total. Thanachart Securities consists of two main lines of business. The first one namely securities brokerage manages the securities brokerage, propriety trading, futures business, unit trust underwriting and repurchasing services as well as securities registrar. The second one namely investment banking and investment advisory manages financial advisory business, securities underwriting and investment advisory business. Competitive Strategies Securities Brokerage The main strategy adopted for the securities brokerage business is growth strategy which focuses on expanding the client base in order to gain a larger market share in all types of customer groups, both institutional and retail. The Company also places strong emphasis on managing its operational costs efficiently and enhancing the knowledge and skills of its staff to enable them to offer financial advisory services in 2012 when the industry will be fully liberalized. Moreover, the Company has adopted a strategy not only to maintain the client base but also to expand it by acquiring new customers through activities such as exhibition booths and participation in investment promotional activities which serve as key channels for reaching new groups of customers. Taking advantage of the strong potential of Thanachart Group, the Company has adopted a strategy aimed at expanding its client base by approaching the customer groups of other members of Thanachart Group through cross-selling activities. In particular, special focus is given to sale of products through Thanachart Bank which has enormous potential in the form of a large base of high net worth depositors and domestic institutional customers. The objective is to offer a full range of investment products and services that cater to specific needs of each group of customers. Thanks to the cooperation of its business alliance BNP Paribas Securities (Singapore) Pte Ltd, the Company succeeded in enlarging its foreign institutional customer base. With the trading value worth 316,662.22 million baht in 2008 which accounted for 3.98 percent of the total market share, the Company was ranked 7 th among the total 38 brokers. This represented an improvement in comparison to 2007 when it ranked 11th with the brokerage trading value of 297,939.89 million baht which accounted for 3.49 percent of the total market share. Futures Business In 2008, the Company’s main strategy placed emphasis on enhancing the efficiency of its services for trading future contracts to be at the same level as those of its competitors. In recognition of Thanachart Group’s main goal of catering to the customer needs through product bundling and cross selling, the Company focuses on enhancing the derivatives knowledge and skills of the marketing and operations staff concerned. The Company also expands its services through its branch network in preparation of the growth of derivatives trading business. As well, it has established a derivatives desk responsible for handling the increasing volume of the Company’s derivatives trading. In addition, it has organized training activities aimed at providing investors with knowledge about derivatives. It has also developed a trading system which allows customers to place their orders through the marketing staff and the Internet. As well, it has developed the supporting operations. Focus is also given to the expansion of the client base which includes both domestic and foreign institutional investors. In addition, it publicizes and introduces its future contracts business through all service outlets of Thanachart Group. Financial Advisory Business and Securities Underwriting The Company’s main competitive strategy in promoting its financial advisory and securities underwriting services in 2008 focused on giving financial advisory services in the areas of mergers and acquisitions, financial restructuring, fund mobilization through debt and equity instruments, and project feasibility studies. In view of the economic slowdown, the Company foresaw growth opportunities for the above-mentioned financial advisory services by maintaining and building good relationships with those customers, to whom the Company gave its services to before. This would give the Company a good opportunity to offer its other financial services to the customers as well as other companies 62
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
belonging to the customer’s group. Focus was also given to introduction and offer of Thanachart Group’s services to both existing and prospective customers through more cross-selling activities. Investment Advisory Business The main competitive strategy places emphasis on providing customers with investment advice covering all types of financial instruments as well as appropriate asset allocations. The Company also studies and develops new structured products so that it has an adequate range of financial instruments that cater to the investment needs of its customers. Focus is given to diverse investment vehicles in order to support cross-selling activities of Thanachart Group. In order to make the customers who were interested in making investments overseas feel more confident in professionalism, in 2008 the Company forged a business alliance with BNP Private Bank to accommodate the overseas investments and get additional advice. Fund Management Business Thanachart Fund Management Company Limited offers services related to mutual fund management, private fund management, provident fund management as well as investment advisory business in order to have fully integrated advisory services. As at 31 December 2008, the Company was ranked 5th with the total assets under management, accounting for 5.84 percent of the total market share, an increase of 0.36 percent from 2007. Competitive Strategies As at 31 December 2008, there were altogether 21 fund management companies. The total net asset value of the retail funds (excluding Vayupak Fund, Country Fund, Real Estate Mutual Fund for the Financial Sector Rehabilitation, Mutual Fund for the Financial Sector Rehabilitation, and Real Estate/Receivables Claim Funds) amounted to 1,217,501 million baht, a decrease of 4.83 percent from 2007. The total net asset value accounted for 14.37 percent of the total deposits in the commercial banking sector. The types of funds with the sharpest decrease included equity funds and mixed funds whose combined value decreased by 31.68 percent from 2007. There were altogether 558 funds which were newly established in 2008. Their combined value amounted to 594,545.95 million baht, an increase of 13,789.80 million baht or 2.37 percent from 2007. The increase could be mainly attributable to the establishment of foreign investment funds. In 2008, there were 268 foreign investment funds whose combined value amounted to 355,059.60 million baht, an increase of 148 funds or in a value 90,009.12 million baht from 2007. Most of the funds, or 188 funds to be exact, were foreign investment funds that invested in short-term debt instrument with maturity of less than one year and combined value amounting to 297,507.16 million baht, accounting for 50.04 percent of all newly established funds in 2008. Most of these funds were invested in South Korean bonds during the first half of 2008. The investments in the short-term debt instruments demonstrated that most investors wanted short-term investments with a relatively constant rate of return. In view of the competition and the economic climates, both the marketing and fund management strategies focused on developing new quality products and services that catered to the customer needs in an efficient manner. The products and services were promoted through the marketing teams of its shareholders that are leading financial institutions, in both the private and public sectors, with fully integrated financial services. Its products and services were also promoted through several business alliances responsible for selling and buying back unit trusts. The Company appointed Thanachart Bank and other commercial banks as well as securities brokerage companies as its agents for supporting the sale and repurchase of the unit trusts under its management. As at 31 December 2008, it had 20 agents. Moreover, its product development placed emphasis on the public mutual funds which were offered to the general public. Focus was given to diversity of products that catered to all types of needs and all types of investors. The unit trusts were offered through the various distribution channels mentioned above as well as through electronic media. Mutual Fund Products As at 31 December 2008, the Company had 73 mutual funds under management, whose total net asset value amounted to 72,658.18 million baht. Of the funds, 71 were public mutual funds with a total net asset value of 71,111.33 million baht, an increase of 258.08 million baht or 0.36 percent from 2007. Having a market share of 5.84 percent, the Company was ranked 5th among the 21 fund ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
63
management companies. The increase in the net asset value in 2008 was mainly due to the increase of 5,982.47 million baht or 107.04 percent in the foreign investment funds and partly due to the increase of 1,031.38 million baht or 4.09 percent in the funds for domestic debt instruments. Private Fund Products As at 31 December 2008, the Company had a total of 23 private funds under management, whose total net asset value amounted to 1,514.82 million baht, a decrease of 1,397.92 or 48 percent from 2007. This was mainly due to the economic slowdown in 2008 which caused the prices of stock on hand to fall sharply. As well, some investors lost confidence and decided to reduce their investments. Some funds had to be terminated. Provident Fund Products As at 31 December 2008, the Company had a total of 21 provident funds under management, whose total net asset value amounted to 4,007.10 million baht, an increase of 392.08 million baht or 10.85 percent from 2007. The provident funds under its management included 9 single provident funds, 9 specific group funds, and 3 general pooled funds. Total membership of the funds increased from 35,067 as at 31 December 2007 to 35,450. Insurance Products Thanachart Group’s insurance business consists of two types including non-life insurance which is operated by Thanachart Insurance Company Limited with services covering every type of insurance, and life insurance which is operated by Thanachart Life Assurance Company Limited with services covering life insurance for individual and corporate clients. Non-Life Insurance Business The non-life insurance business provides insurance against loss, which includes fire insurance, motor insurance, marine and transportation insurance, and miscellaneous insurance as well as investment business. Competitive Strategy Thanachart Insurance Company places strong emphasis on high quality standards of services which are efficient and honest. It also develops new lines of products or new insurance policies that match the needs of the target customer groups, taking into account the prevailing economic and social conditions. The Company ensures that the premium rates are fair to customers. As well, its proactive plans are constantly reviewed to ensure that they take into consideration the changing situations. The Company also increases the distribution channels in order to expand its new client base and maintain existing customers. The majority of its customers or about 95 percent of the total customers were retail customers whose sum of the insured property amounted to less than 5 million baht. The major types of insurance products purchased by the customers included auto insurance and fire insurance for residence. These customer groups were Thanachart Bank’s loan customers. The Company also got its customers from its own marketing activities as well as from insurance brokers and its own insurance sales representatives. The customer groups whose sum of the insured property amounted to more than 5 million baht consisted of institutional clients and private enterprises in different lines of business, both commercial and industrial. The major products purchased by these customer groups were miscellaneous insurance and fire insurance. In view of the above customer groups, it could be seen that, since the commencement of the Company’s non-life insurance business, there has been no single customer who accounts for more than 30 percent of its total income. Moreover, the Company sells its products only to customers residing in Thailand. Industrial Outlook and Competition The non-life insurance industry in 2008 continued to grow from 2007. During the period from January to September 2008, Thailand’s non-life insurance industry’s total direct premiums amounted to 78,277.06 million baht, an increase of 5.39 percent over the same period in the previous year. The top two types of 64
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
insurance with the highest growth were health insurance and personal accidental insurance which grew 34.97 percent and 15.74 percent respectively. Thanachart Insurance’s direct premiums in 2008 amounted to 3,147.37 million baht, an increase of 23.07 percent over the same period in the previous year. Thanks to the bancassurance channel, the Company succeeded in expanding its retail client base and in selling its insurance products to retail customers of Thanachart Bank. Other channels used by the Company included direct sales, telemarketing, cooperatives, insurance brokers and agents. In 2008, the Company placed more emphasis on used car insurance. As well, it focused on maintaining the existing client base. To enhance customer satisfaction, the Company adopted a strategy aimed at improving both pre- and after-sales services. (Unit: Million Baht)
No.
FIRE INSURANCE
Company
MARINE AND TRANSPORTATION SHIPS
GOODS
Auto Insurance
miscellaneous insurance
Compulsory
voluntary
personal accident
total health
others
1
Viriya Insurance
150,880
1,840
57,933
1,767,061
9,421,600
184,725
14,251
244,598
11,842,887
2
Bangkok Insurance
687,364
70,049
167,732
105,033
2,059,674
316,864
275,137
1,361,022
5,042,877
3
Dhipaya Insurance
551,677
35,523
99,509
350,110
1,110,302
466,936
152,219
1,790,464
4,556,739
4
Syn Mun Kong
Insurance
88,491
-
4,657
559,234
2,689,834
261,513
7,229
115,263
3,726,221
5
LMG
24,766
-
12,781
200,235
2,400,985
36,175
-
106,087
2,781,029
Total
1,503,178 107,412
342,612
6
Thanachart Insurance
Market Share (Percent) Grand Total
2,981,673 17,682,395 1,266,213
448,836 3,617,434 27,946,753
45,698
405
1,166
115,602
1,891,478
60,764
-
182,196
2,297,309
0.79
0.14
0.04
1.43
4.77
0.95
0.00
1.39
2.93
5,767,863 281,608 2,862,633
8,061,736 39,619,165 6,380,747 2,190,188 13,113,123 78,277,063
Source: The Office of Insurance Commission (OIC) (information from January to September 2008)
Life Assurance Business Thanachart Life Assurance Company Limited provides service related to life assurance and health insurance. The Company’s services can be divided into two main types which include personal life assurance and group life assurance (for institutional clients and organizations). Industrial Outlook and Competition Thanachart Life Assurance has adopted a multi-distribution channel strategy, aimed at catering to the diverse and different needs of its prospective customers by offering products and services that are appropriate to each group of the prospective customers. The Company’s current distribution channels consist of sale through the Company, cooperatives, brokers, financial institutions, Thanachart Bank (bancassurance) and life assurance sales representatives. As regards the life assurance industry in the first ten months (JanuaryOctober) of 2008, the life assurance industry’s total direct premiums amounted to 177,773 million baht, an increase of 10.02 percent from the previous year. However, the growth was at a decreasing rate, when compared to the same period in 2007 which registered a growth of 17.96 percent. This was mainly due to the slowdown of the Thai economy and the rising cost of living which decreases the purchasing power of customers. For personal life assurance, there were many forms of sales promotions. These included, among others, recruitment of more sales representatives, establishment of additional distribution channels, and development of new products which were appropriate for the market conditions and for customer groups of each distribution channel. The Company also continuously organized numerous activities to create good relationship with customers and in order to maintain the high policy retention rate in order to offset the direct premiums of new policies which grew at a decreasing rate. Currently, there are 24 life assurance companies in total. Ranked 10th among these 24 companies, Thanachart Life Assurance commanded 2.22 percent market share in terms of all types of premiums.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
65
As it mainly focused on the group life assurance, its first-year premiums for the group life assurance were ranked 2nd in the life assurance industry, while its total premiums for the group life assurance were ranked 3rd. On the industry outlook for 2009, it is expected that the life assurance business will continue to grow but at a lower rate than the previous year. This is mainly due to the economic slowdown which continues from the previous year. Consumers will spend their money more cautiously. However, there are positive factors which help promote the industrial growth. In view of the fact that the interest rates are declining, life assurance products become another savings option since they give an attractive rate of return. Moreover, insurance premiums are tax deductible up to 100,000 baht per annum. Factors affecting opportunities or constraints in operating financial business of Thanachart Group In 2008, the financial institutions’ loans to the private sector grew 9.3 percent, increase from 4.0 percent in the previous year. In previous year, the credit grew in the first half of the year but slowed down in the second half, mainly due to weaker demand, both domestically and globally, which caused the demand for credit to decline. Moreover, the commercial banks enforced stricter loan approval in order to prevent new non-performing loans. The hire purchase business in 2008 was also hard hit by the economic slowdown and the rising crude oil prices. As a result, the demand for cars and motorcycles slowed down. The growth of the hire purchase business in 2008 was slightly slower than the growth in 2007. Apart from the economic and political factors, changes initiated by the authorities concerned in some areas represented business constraints in the short-term but helped strengthen the financial system and standardize the Thai commercial banking system in the long-term. The changes included the implementation of the consolidated supervision, Basel II requirements, as well as compliance with the International Accounting Standard No. 39 (IAS 39), and the new Deposit Protection Agency (DPA) Act. The changes affected the business operations of the commercial banks in areas including the loan loss provisions. However, the changes in the regulations which were imposed on the commercial banks did not apply to other types of financial institutions. This represented a major obstacle to the commercial banks’ business operations, mainly because it reduced their competitiveness in the market. Currently, there are many types of financial institutions, such as non-banks. These entities are allowed to execute some financial transactions while the commercial banks are not allowed to do, as the latter are subject to a number of regulatory requirements. For example, as Thanachart Bank is subject to capital adequacy requirements, the Bank has less flexibility in giving loans than factoring companies which are not subject to capital adequacy requirements. As well, in compliance with the capital-to-risk-asset ratio (BIS ratio) requirements, Thanachart Bank has less flexibility in giving loans than factoring companies in general. However, the new Financial Institution Business Act stipulates that for entities which may have impact on the country’s overall economic system and there is no law specially governing such business, the BOT may propose the passing of a law that subjects such business partially or wholly to the jurisdiction under this Act. As a result, the non-banks, to which the conditions apply, may be subject to the control by the BOT. Key positive factors that supported the business operations of the commercial banks in 2008 were as follows: • Acceleration of disbursement of the government budget and the rising prices of agricultural products helped stimulate the economic growth but at a lower rate than the previous year. • The commercial banks were allowed to engage in more types of financial business e.g. - Relaxing regulations governing the deposit and transfer of foreign currencies enables the commercial banks to accept deposits in form of foreign currencies. - Allowing the commercial banks to issue bills of exchange helps the commercial banks cut their financial costs and provides the savers with an additional investment alternative. 66
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
- Allowing foreign investors to increase their shareholdings helps strengthen the financial health of the Thai financial institutions and enhance their competitiveness. As well, it helps facilitate transfer of technology as well as development of financial products and services, in preparation for the financial liberalization in the future. Competition in the Industry In 2008, the total number of the commercial banks in the system amounted to 34, of which 18 were registered in Thailand while the remaining 16 were branches of foreign banks. The numbers were the same as the previous year. The total deposits of the commercial banking system amounted to 7,156,292 million baht. The total deposits of the Thai commercial banks registered in Thailand amounted to 6,649,283 million baht, accounting for 92.9 percent, while the total deposits of the foreign bank branches amounted to 507,009 million baht, accounting for the remaining 7.1 percent. The net loans of the commercial banking system amounted to 7,549,404 million baht. The net loans of the commercial banks registered in Thailand amounted to 6,849,530 million baht, accounting for 90.7 percent, while the net loans of the foreign bank branches amounted to 699,784 million baht, accounting for the remaining 9.3 percent, which was close to the previous year. Apart the competition in the commercial banking system, there is also competition in the financial system such as non-banks, financial market, capital market, as well as the state’s specialized financial institutions, which play a more active role in the economic system, as a result of the changes in the regulators’ rules and regulations. The changes allow for more flexibility and prepare the industry for the financial liberalization in the future. The keener competition has caused the commercial banks to adopt non-price strategies, such as developing a more diverse range of financial products, increasing more distribution channels, improving quality of service, and establishing business alliances in the finance business. The objective is to provide the customers with greater convenience and to cater to all the financial needs of the customers. Moreover, the commercial banks place strong emphasis on building a positive corporate image for their organization, e.g. by organizing public relations activities and establishing more corporate social responsibility (CSR) activities. The non-price strategies are in addition to the price strategy which remains the principal strategy pursued by the commercial banks. In 2008, the deposits of the Thai financial institutions grew 8.3 percent over the previous year. During the first half of 2008, the deposit growth was rather slow as depositors shifted their funds to other instruments. However, the deposit growth in the second half improved, as depositors shifted their funds back to the banks. Taking into consideration both the bills of exchange and the deposits of the Thai financial institutions, both instruments grew 8.9 percent. As regards the competition in giving loans in the commercial banking system, focus was given to both interest rates and quality of service. In 2008, the loans given by the commercial banks to the private sector grew 9.3 percent over the same period of the previous year. Although the growth in the first three quarters of 2008 was relatively high, the growth in the last quarter was slower, mainly due to the economic slowdown. The loans given to the private sector significantly slowed down in line with the economic situations and concern about the ability to make debt repayments. As regards the interest rates in 2008, the commercial banks reduced the interest rates for their deposits and loans in line with the direction of the policy interest rate. During the first half of the year, the BOT maintained the policy interest rate at 3.25 percent while it increased the rate in the third quarter, as a result of higher risk of upside inflation. During the latter part of the year, the BOT reduced its policy interest rate to 2.75 percent. As a result, at the end of 2008, the interest rate for one-year fixed deposits was cut from 2.25 - 2.375 percent to 1.75 - 2.0 percent. ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
67
On the other hand, the interest rates for loans decreased by only 0.125 percent from the end of 2007 to 6.75 percent at the end of 2008. This was partly due to the economic and business risks which remained relatively high. As a result, the interest rate spread or the difference between the deposit rates and the lending rates increased from 4.5-4.625 percent to 4.75-5.0 percent. The Bank’s Size Compared to Competitors In 2008, Thanachart Bank’s total assets amounted to 368,272 million baht, an increase of 77,174 million baht or 26.5 percent over the previous year. Its asset size was ranked 8th among the 18 commercial banks registered in Thailand. Thanachart Bank commanded a 4.81 percent market share, taking into account the combined value of total deposits and short-term borrowings of the commercial banking system. Its total deposits of 318,760 million baht were ranked 8 th among the commercial banks registered in Thailand. As regards loans, Thanachart Bank’s total loans amounted to 272,925 million baht. Taking into consideration the total loans of the commercial banking system, Thanachart Bank commanded a 4.67 percent market share. It was ranked 8th among the commercial banks registered in Thailand. Future Trend of Competition In view of the global economic downturn, domestic situations, and declining crude oil prices during the latter part of 2008, it is expected that both the Thai economic growth and the inflation rate in 2009 will be relatively low. However, there are also positive factors as a result of the government’s fiscal policy and economic stimulus measures to boost the Thai economy. These include spending by state agencies, funds for giving loans, as well as tax cuts or various tax benefits designed to help consumers and small-and medium-scale enterprises (SMEs). These factors will help increase the liquidity of the financial institutions, mainly due to the increase in bank deposits. However, the lending activities are expected to slow down. This will also depend on the government’s policy to boost the lending. The deposits are expected to rise in 2009 as investments will be shifted from other sources which are riskier, to financial institutions as deposits. However, the form of deposits or investments by savers will change. The financial products similar to the bank deposits such as bills of exchange, mutual funds, and insurance policies through bancassurance channel which are not too risky, will become more popular. Loan growth is expected to slowdown in 2009. Business and household loans as well as real estate and hire purchase loans will all be affected, as a result of the economic slowdown which weakens the demand for loans. Moreover, the commercial banks enforce stricter loan approval. The state-owned commercial banks and specialized banks will play a more important role in giving loans in line with the government’s economic stimulus policy. However, the global economic crisis remains the key factor affecting the consumer confidence as well as the investor confidence in businesses, particularly the export industry, as reflected by the weakness in the labor market. The unemployment rate during the latter part of 2008 rose. As a result, the commercial banks keep the interest rate spread in order to maintain the level of the interest income. Moreover, the commercial banks place emphasis on building up not only the confidence of their customers through public relations activities but also the confidence of their shareholders and society by adhering to the principles of good corporate governance and promoting more CSR activities.
68
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Availability of Products and Services Sources of Fund Thanachart Bank’s issued and paid-up share capital as well as its legal reserve and retained earnings are one of its main sources of fund. In 2008, these amounted 17,346 million baht. Thanachart Bank’s other two main sources of fund include the following: 1. Deposits as of the end of 2008 amounted to 270,832 million baht, an increase from 189,086 million baht at the end of 2007. 2. Borrowings worth 62,288 million baht, of which the short-term borrowings amounted to 47,928 million baht. This was mainly due to the increase in short-term bills of exchange. Thanachart Bank provided its customers with an additional alternative for their savings by issuing short-term bills of exchange. On the other hand, Thanachart Bank’s long-term borrowings amounted to 14,360 million baht. During the second quarter of 2008, Thanachart Bank issued subordinated debentures worth 5,000 million baht with maturity of seven years and an average coupon rate of 5.61 percent. The proceeds would be used to finance the future loan growth. Key Sources of Fund (Unit: Million Baht)
Sources of Fund Shareholders’ equity Deposits
Increase (Decrease) from 2007 2008
2007
million baht
percent
28,247
23,661
4,586
19.38
270,832
189,086
81,746
43.23
Borrowings
- Short-term borrowings
47,928
58,998
(11,070)
(18.76)
- Long-term borrowings
14,360
12,960
1,400
10.80
62,288
71,958
(9,670)
(13.44)
361,367
284,705
76,662
26.93
Total borrowings Total
Deposit Rate Policy
In determining deposit rates, it is the policy of Thanachart Bank to take into consideration liquidity, demand for loans, interest rate and liquidity risk management policy, as well as other external factors which include, among others, inflation rate, the country’s economic situations, overall rate of return and interest rates in the market. Funding or borrowings from parties related to executives or major shareholders As of the end of 2008, the loans given by Thanachart Bank to its parent company, subsidiaries and associated companies only within Thanachart Group consisted of the following: 1. Major Shareholder (Thanachart Capital Public Company Limited) The Company and Thanachart Bank jointly made the announcement on their business reorganization plan. It became difficult for Thanachart Capital to find sources of fund as all its deposits were transferred to Thanachart Bank since the beginning of 2006. However, there were still outstanding hire purchase loans remaining at Thanachart Capital. These hire purchase loans would be gradually repaid in line with their respective installment plans. As a result, Thanachart Bank had to give loans to Thanachart Capital, to help the latter address the constraints on the sources of fund. In 2008, Thanachart Capital gradually repaid its loans given by Thanachart Bank. As at 31 December of 2008, its outstanding loan balance amounted to 4,500 million baht, a decrease from 12,500 million baht in the previous year. 2. Thanachart Group Leasing Company Limited (a subsidiary of Thanachart Bank) Thanachart Bank gave loans to Thanachart Group Leasing Company Limited, the proceeds of which in turn were used to give hire purchase loans for all types of cars in line with Thanachart Group’s policy. As at 31 December 2008, Thanachart Bank’s outstanding balance of the loans given to Thanachart Group Leasing amounted to 3,645 million baht, a decrease from 4,000 million baht in the previous year. ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
69
3. T Leasing 2000 Company Limited (a subsidiary of Thanachart Bank) Thanachart Bank gave loans to Thanachart Leasing 2000 Company Limited, the proceeds of which in turn were used to give hire purchase loans for all types of commercial vehicles and passenger cars with seating for up to 7 adults as well as motorcycles. In line with the approval given by the BOT on 5 July 2007, T Leasing 2000 was allowed to operate motorcycle hire purchase business in replacement of Thanachart Group Leasing Company Limited. As at 31 December 2008, Thanachart Bank’s outstanding balance of the loans given to T Leasing 2000 amounted to 824 million baht, an increase from 294 million baht in the previous year. 4. NFS Asset Management Company Limited (a subsidiary of Thanachart Capital) Thanachart Bank gave loans to NFS Asset Management Company Limited, the proceeds of which in turn were used to purchase non-performing loans from Thanachart Group. As at 31 December 2008, Thanachart Bank’s outstanding balance of the loans given to the company amounted to 3,650 million baht, a decrease from 4,250 million baht in the previous year. The total loans given by Thanachart Bank to the member companies of Thanachart Group amounted to 12,619 million baht, accounting for 4.8 percent of Thanachart Bank’s total loans as at 31 December 2008. All the loans were given with the approval granted by the BOT. Lending and Collateral Policies In addition to the loans given to its major shareholder, Thanachart Bank not only concentrates on providing corporate loan services but also acting as the financial advisor to potential medium-and large-sized corporate customers that are in the target sectors and expanding continuously, e.g. hotels, hospitals and etc. In considering loan applications, the applicant’s past performance, expertise in the business and ability to repay debt are of primary importance. As regards the collateral, Thanachart Bank takes into account the quality and liquidity of the collateral. Loan Risk Management In considering loan applications of large-scale borrowers, the credit department and the credit analysis department will jointly assess the creditworthiness of the customers in terms of their business performance and their ability to repay loans, making use of the loan rating techniques. At the same time, Thanachart Bank applies a tool called RAROC Model in estimating return from extending loans, which should be in line with the risk profile of each customer. On the other hand, in considering loan applications of retail borrowers, Thanachart Bank assesses the creditworthiness of the customers in terms of their ability to repay loans, making use of the credit scoring technique which is based on the analysis of loan repayment records of all retail customers. The credit scoring is subject to regular review by the credit risk analysis work unit. Policies on Loan Control, Loan Approval and Debtor Follow-up Thanachart Bank has a policy to oversee the operations. In particular, it has established Credit Policy and Guidelines. Moreover, its criteria in determining the line of credit for each customer are stricter than the measures imposed by the BOT. The loan department and the loan analysis department are responsible for analyzing credit applications of the customers independently, making use of the knowledge and expertise of the staff of each department. Then, every credit application is presented to Credit Committee for consideration and approval. In this connection, the tools that assist the decision making include RAROC model, credit scoring and loan rating. After a thorough consideration, Thanachart Bank’s credit checking unit will be responsible for checking customers’ information and regularly report any correspondences between Thanachart Bank and customers. In addition, the Watch List Committee holds its meeting every month. The Committee also reviews the quality of customers once a year to monitor the use of their credit line, their conformity with specified terms, business situations as well as various events that may have impact on their business operations. The purpose is to protect against new non-performing loans.
70
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Ability to Maintain Capital Adequacy It is Thanachart Bank’s policy to maintain a capital-to-risk-asset ratio at the level which is adequate to cope with the risks arising from its business operations and the volatility as a result of various factors. It is also its policy to maintain the capital-to-risk-asset ratio at the level that is higher than the minimum requirement of 8.5 percent imposed by the BOT. The BOT also requires that the minimum ratio of tier-1 capital to risk-weighted assets amounts to 4.25 percent. As at 31 December 2008, Thanachart Bank’s capital-to-risk-asset ratio and its ratio of tier-1 capital to risk-weighted assets in line with Basel II norms amounted to 11.18 percent and 8.02 percent respectively. Liquidity It is Thanachart Bank’s policy to manage its liquidity appropriately. The main objective is to maintain the level of its liquid assets in line with the requirements of the BOT and to maintain a good balance between its liquidity and its liabilities. In this connection, Thanachart Bank’s Asset and Liability Management Committee (ALCO) is responsible for managing the liquidity and interest rates. The Committee consists of Thanachart Bank’s high-level executives. Its main responsibilities include formulation of the asset and liability management plan as well as setting and reviewing the direction of Thanachart Bank’s investment policy in line with the risk policy approved by the Bank’s Board of Directors and Executive Committee. ALCO meets every week to consider the liquidity risk, interest income and interest expenses, short-term and long-term structure of its assets and liabilities, impact on Thanachart Bank’s liquidity as a result of changes in the economic conditions, money markets and capital markets, both local and overseas, as well as rules and regulations of the authorities concerned. As part of its responsibilities, ALCO establishes the policy on the structure of both fixed and floating interest rates, ensuring that they are in line with Thanachart Bank’s capital structure. To support ALCO’s work, Thanachart Bank’s Risk Management Department helps conduct the interest rate gap analysis and the liquidity gap analysis. The objective of the analyses is to measure the impact from the interest rates and the liquidity. Moreover, to protect against possible negative impact from the business operations, ALCO determines credit limits for each business sector.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
71
RISK MANAGEMENT AND RISK FACTORS
OVERVIEW OF RISK MANAGEMENT The Thai economy in 2008 faced several risks: global financial crisis and overall slowdown of the world economy, volatility of commodity and oil prices, and a severe problem of political instability affecting confidence of consumers as well as foreign investors and tourists. The Thai financial institutions have thus been cautious, reflecting in their level of excess liquidity which was higher than usual as a cushion for the on-going financial turmoil. Excess liquidity in the Thai financial system at the year ended 2008 increased from the previous year, resulting in the declining interest rate on deposits in tandem with the policy rate of the Bank of Thailand “BOT”. However in 2009, the Thai economy has a tendency to slowdown and the unemployment rate to increase. The financial institution has to be cautious of credit lending in order to avoid the future problem of non-performing loans. Thanachart Bank Public Company Limited realized the fast-evolving financial environment and continued to give priority to developments of credit lending policy and the risk management system, e.g. behavior scoring which would help the Bank to manage risk properly and coherently with the risk profile. To further strengthen the stability, the Bank has developed the Internal Capital Adequacy Assessment Process (ICAAP) according to Basel II: Pillar 2 regulation, which allows the Bank to manage its capital more efficiently. THE BANK’S RISK MANAGEMENT STRUCTURE Thanachart Bank recognizes the importance of risk management since its business operations are always faced with various risk factors, both internal and external, which may affect the Bank’s operation. Therefore, in order to be able to control and manage the risks efficiently, the Bank has established a structure in which the risk management is placed under the direction and supervision of the following committees. The Board and Committees on the Policy Side: The Bank’s Board of Directors and the Executive Committee play a role in establishing policies and guidelines for an efficient enterprise-wide risk management, taking into consideration the impact of risk on the Bank’s goal, operations and financial position, in line with the Bank’s operation. The Risk Management Committee plays a role in establishing strategic plans and developing the risk management procedure, as well as considering appropriate risk management policy and guideline which were proposed to the Executive Committee and the Bank’s Board of Directors for its consideration and approval. The Audit Committee plays a role in establishing guidelines in relation to operation control and supervision in compliance with the requirement of the authorities concerned. The committee is also responsible for checking the effectiveness and adequacy of risk management processes and internal control systems.
72
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
The IT Security Management Committee plays a role in establishing the IT Security System policies, proposing the risk prevention guideline against information and technology risk, as well as supervising the operation of the IT Security System in accordance with its plan. The Committees on the Operation Side: The Asset and Liability Management Committee plays a role in supervising the structure of the Bank’s assets and liabilities which is appropriate for business characters in line with the Bank’s risk management policy. The Investment Committee plays a role in supervising the investments in financial instruments of the Bank in line with the Bank’s market risk management policy. The Credit Committee plays a role in supervising the credit extension and other credit-related transactions in line with the Bank’s credit risk management policy. THE BANK’S RISK MANAGEMENT STRUCTURE (INFORMATION AS OF 31 DECEMBER 2008)
the bank’s board of directors
Risk Management Division
Risk Management Committee
Audit Committee
Internal Audit Group
Head of Risk
executive committee
Compliance Department
Risk Management Department Credit Analysis Department Risk Control Department Business Contingency Plan Unit
Credit Committee
Investment Committee
Asset and Liability Management Committee
IT Security Management Committee
Chief Executive Officer
Chief Operating Officer
Head of Operation
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
73
• The conduct of business affairs is based on a system of check and balance with the Middle Office, comprising of the Risk Control Department and the Back Office, being separated from the Front Office. • The Bank would put in writing all its established policies and guidelines related to risk management as well as specified responsibilities for each unit concerned. Moreover, the Bank has established a four-step guideline for risk management, namely: 1) identification of the nature of risk and risk factors, 2) development of appropriate tools and models for measuring risks, 3) the control of risks within an acceptable limits, and 4) the monitoring of risk status so that they can be properly managed in a timely manner when situations change. • The Bank has established different degrees and levels of risk to gauge an acceptable level of risk or to give an early warning signal before any serious damage occurs. The aforementioned risk management systems are developed based on prudent principles and will be reviewed regularly to fit the prevailing situation. The systems are designed to be transparent, clear and taking into consideration the interests of the shareholders, customers and staff.
KEY TYPES OF RISK FACED BY THE BANK
1. Credit Risk
Credit risk arises from a situation in which the Bank’s debtors or counter-parties of contracts with the Bank fail to fulfill their agreed obligations. This might be attributable to the financial problems faced by the debtors, economic volatilities which impact on businesses, or the debtors’ mismanagement. Such problems may adversely affect the Bank’s earnings and shareholders’ equity. The credit risk may arise from normal financial transactions such as loans, obligations in the form of avals and guarantees or other transactions related to lending, as well as investment in market instruments issued by state agencies or state enterprises, which neither the government nor the BOT guarantees, and private debt instruments such as debentures. With its credit risk management policies and guidelines, the Bank has successfully established a credit culture. To start with, the credit risk of the borrowers, counter-parties of contracts, or issuers of debt instruments would be assessed by making use of the credit risk models developed for each type of borrowers or counter-parties. The Credit Analysis Department, which is an independent unit, would then take the responsibility in assessing credit with the use of such models. Authorized committees would consider and approve the level of credit risk of borrowers or counter-parties, appropriate credit lines, as well as terms and conditions related to loans or obligations. Authorized committees also control the overall risk status by appropriately diversifying the credit risk into various groups of borrowers under the established credit risk ceilings, as well as monitoring the quality of loans such that they are properly managed and carefully implemented. The emphasis was put on the business potential and repayment ability, with an independent risk control unit supervising credit transactions in accordance with the policies and guidelines on credit risk management. There is also an Internal Audit Group which is responsible for verifying the credit transactions in line with the BOT’s guidelines. To ensure appropriate returns under acceptable risk, the Bank has made use of a measuring tool called RAROC (Risk Adjusted Return on Capital). Moreover, the Bank also has stress tests to estimate any damage that may occur in the crisis in which borrower’s ability to repay is reduced or eroded, given hypothesized conditions and risk factors affecting industry sector that the debtors’ business belongs to.
74
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
IMPORTANT FACTORS IN CREDIT RISK
1.1 Risk arising from clustering of loans It is the Bank’s goal to appropriately diversify its loans to various groups of customers. The emphasis is placed on groups of customers with high potential while avoiding a concentration on any particular group of customers. The Bank ensures that the risk for its overall loan portfolios is properly managed, with monitoring analysis and assessment being reported to the related committees on a regular basis. The purpose is to mitigate the risk arising from uncontrollable factors which may affect any particular group of business which has obtained too much credit from the Bank.
Loan Portfolios as of 31 December 2008 and 31 December 2007 classified by type of business
2008
Type of Business
Debt Balance (Million Baht)
12,815
Holding Company and Related Company
1,152
2007 percent
Debt Balance (Million Baht)
percent
4.69
21,668
9.62
0.42
1,274
0.57
Manufacturing and Commerce
12,819
4.69
7,033
3.12
Real Estate and Construction
14,625
5.35
6,115
2.72
Public Utilities and Service
13,015
4.76
7,377
3.28
7,393
2.71
7,742
3.44
198,344
72.59
162,205
72.04
13,065
4.78
11,735
5.21
273,228
100.00
225,149
100.00
Agriculture and Mining
Housing Loans Hire Purchase Loans Others
Total Loans and Accrued Interest Receivables
The information on loan portfolios in 2008 showed that the hire purchase loans were expanded from 72.04 percent as of 31 December 2007 to 72.59 percent of the total loans and accrued interest receivables as of 31 December 2008. However, most of the hire purchase loans were given to retail customers whose credit line was relatively low and the customer base was diversified. 1.2 Risk arising from deteriorating quality of loans The non-performing loans, which classified as substandard, doubtful and doubtful of loss, are the main problems encountered by each financial institution. Since non-performing loans inversely affect income and capital of the Bank, the Bank thus put emphasis on controlling quality of loans by regularly establishing policies and procedures in monitoring the quality of loans. Non-Performing Loans as of 31 December 2008, compared to the same period in 2007:
Loan classification
2008 Debt Balance (Million Baht)
2007 percent
Debt Balance (Million Baht)
percent
Substandard
1,547
21.47
1,299
24.75
Doubtful
1,629
22.61
1,614
30.75
Doubtful of Loss
4,029
55.92
2,335
44.50
100.00
5,248
100.00
Total
7,205
The Bank’s non-performing loans increased from 5,248 million baht as of 31 December 2007 to 7,205 million baht as of 31 December 2008. This owed mainly to the economic slowdown. In view of overall loans portfolio, the non-performing loans was accountable for 2.64 percent of the total loans and interest receivable, increasing from 2.33 percent in the previous year. There are classified by type of business as follows: ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
75
Non-Performing Loans Classified by Type of Business
2008
Type of Business
Debt Balance (Million Baht)
Agriculture and Mining
9
2007 percent
0.12
Debt Balance (Million Baht)
-
percent
0.00
Manufacturing and Commerce
909
12.62
725
13.81
Real Estate and Construction
856
11.88
863
16.44
Public Utilities and Service
141
1.96
206
3.93
Housing Loans
418
5.80
367
6.99
Hire Purchase Loans
3,735
51.84
2,301
43.85
Others
1,137
15.78
786
14.98
Total Loans and Accrued Interest Receivables
7,205
100.00
5,248
100.00
As of 31 December 2008, the Bank was not faced with any credit risk arising from non-performing loans which collateral did not fully cover the remaining loan amounts (after deducting provision for loan loss). This was due to the fact that, in line with the International Accounting Standards 39 (IAS39) requirements, the Bank already set aside a provision of the whole amount of the non-performing loans which the collateral did not fully cover the remaining loan amounts. (Unit: Million Baht)
Non-Performing Loans (NPLs)
2008
2007
7,205
5,248
Change
1,957
Loans not Fully Covered by Collateral
5,338
3,423 1,915
Provision for Loan Loss
5,338
3,423 1,915
Loans not Fully Covered by Collateral after Loan Loss Provision
-
-
-
Trouble Debt Restructuring (Unit: Million Baht)
2008
Number of Debtors (persons) Outstanding Principal Balance and Accrued Interest Receivables Loans not Fully Covered by Collateral Revaluation Allowance for Debt Restructuring Total Loans and Accrued Interest Receivables Ratio of Restructured Debts to Total Loans (Percent)
2007
381
292
2,645
2,698
883
777
20
10
273,228
225,149
0.97
1.20
The risk related to debt restructuring arises from the re-entry of the debtors which have been previously restructured. In other words, after debt restructuring, the debtors default on their payments and become non-performing again. This has an adverse effect on the Bank’s performance in terms of debt restructuring. As of 31 December 2008, the outstanding principal balance and the accrued interest receivables of the restructured debt amounted to 2,645 million baht, or 0.97 percent of the total loans and interest receivables, a decrease from 2,698 million baht as of 31 December 2007. The net restructured debt (less collateral) amounted to approximately 883 million baht. 1.3 Risk arising from collateral For loans which are covered by collateral, the Bank carefully analyzed and classified collateral quality by type of collateral, taking into consideration liquidity and the risk level of the collateral. The Bank’s 76
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
analysis result is used as a factor in determining the risk level of the loan collateral. In this regard, the collateral both in the form of immovable and movable properties whose value could be appraised is subjected to price appraisal or valuation in line with regulations established by the BOT. In the past year, car hire purchase loan service continued to expand. According to the BOT’s announcement regarding the valueless and non-callable asset dated December 2006, the reserve regulation based on IAS39 allowed cars to be considered as collateral assets whose ownership belonged to the Bank. If the debtors were unable to repay their loans, the Bank would be able to repossess the assets immediately for the purpose of reselling them in the used car market. As a result, the Bank might be faced with a risk arising from its inability to repossess the cars or from its inability to compensate for the incurred loss although the assets could be resold. This depends on risk factors, such as conditions of the used car market and the condition of the repossessed cars. 1.4 Risk arising from the impairment of the property foreclosed As of 31 December 2008, the net amount of property foreclosed at accounting cost value (after the allowance for impairment) totaled to 1,541 million baht, or 0.42 percent of the total assets. The allowance for impairment accounted for 9.14 percent of the accounting cost value. 1.5 Risk arising from guarantees and avals As part of its services to customers, the bank has obligations in the form of avals, guarantees for loans and letter of credits. The risk arises when the Bank is held responsible for its customers which are unable to fulfill their obligations. In managing the risk arising from guarantees and avals, the Bank controls the risk by carefully examining the supporting information as well as applying strict approval procedures. The Bank also controls and monitors these obligations, using the same approaches as the ones applied to the Bank’s usual loan extension. As of 31 December 2008, the Bank’s obligations in the form of avals and guarantees for loans amounted to 4,296 million baht, or 1.17 percent of the total assets. 2. Market Risk The market risk arises from movements of interest rates, foreign currency exchange rates, capitals, and prices of instruments in the money market or the capital market, which may adversely affect the Bank’s earnings. The market risk consists of three types of risk including price risk, interest rate risk and exchange rate risk. It is the Bank’s policy to control and manage these risks within an acceptable level and in line with the Bank’s policy on risk management. 2.1 Price Risk The price risk arises when the Bank’s earnings or capitals are adversely affected by any change in the price of debt and equity instruments, resulting in the decrease of value of the Bank’s investment in trading and available-for-sales securities. The Bank has developed a tool for measuring the risk based on Value-at-Risk (VaR) Model. This tool is used to estimate the maximum loss at a certain confidence level if the securities are held for a specified period of time. The calculated values obtained from this tool serve as a guide in establishing an acceptable level of risk. The Investment Committee is responsible for controlling and monitoring this type of risk. To make sure that such a tool is efficient and gives accurate information, the Bank requires that the tool is subjected to backtesting in line with the standard framework established by the Bank for International Settlement (BIS). In addition, the Bank has conducted simulations and stress tests to analyze crisis situation that may result in a sudden, sharp fall in the prices of securities in the capital market. The objective is to estimate the size of any potential loss that might affect the Bank’s earnings and capitals.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
77
As of 31 December 2008, the Bank’s investments in trading and available-for-sale securities classified by type of investment are as follows: (Unit: Million Baht)
fair value 2008
Current Investments
2007
-
-
1,977
101
427
32
2,404
133
Long-term Investments
Available-for-sale Investments
Government and State-Enterprise Securities
693
474
Private Debt Securities
2,838
1,275
Domestic Marketable Equity Securities
Listed Securities
253
407
Unit Trusts
376
877
Total Long-term Investments
4,160
3,033
Total Investments in Trading and Available-for-sale Securities
6,564
3,166
Trading Investments
Available-for-sale Investments
Government and State-Enterprise Securities
Private Debt Securities
Total Current Investments
Due to the decreasing trend of money-market interest rates, the Bank has increased investments in the government and state-enterprise securities as well as the long-term private debt securities. Meanwhile, as the volatility of securities price increased due to the wide-spread global financial crisis, the Bank has thus decreased its investment in equity securities. Overall, the Bank’s price risk then slightly decreased from the previous year. 2.2 Interest Rate Risk The interest rate risk is the risk that the Bank’s earnings or capitals are adversely affected by changes in interest rates of its rate-sensitive items including assets, liabilities and off-balance sheet items whose re-pricing periods are mismatched. The changes may have a negative impact on the Bank’s net interest income. It is the Bank’s goal to run its business operations with a long-term effective interest rate risk management system, i.e. to maintain an appropriate structure of assets and liabilities which are rate-sensitive at different time intervals. To ensure maximum benefits to the Bank and its shareholders, the Bank has developed the Interest Rate Gap Analysis Model as a tool for measuring interest rate risk by assessing the impact that may arise from the mismatch of the re-pricing periods of assets, liabilities and obligations at different time intervals. In order to ensure that the risk for the Bank’s business operations is within an acceptable limit, the Bank has also established an acceptable risk ceiling level and an early warning indicators, taking into account the structure of assets, liabilities and obligations as well as interest rate re-pricing which are expected to take place in each period of time in accordance with the Bank’s business plan. The Asset and Liability Management Committee (ALCO) is responsible for monitoring and controlling the interest rate risk. This committee closely monitors economic situations, developments in the money market and capital market, and the direction of interest rates which could pose an interest rate risk, in order to determine measures needed to accommodate such risk.
78
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Details of the Bank’s financial assets and liabilities as of 31 December 2008, classified by the period when the interest rates would be re-priced in accordance with contracts related to the Bank’s financial assets and liabilities: (Unit: Million Baht)
items
The period when the interest rate would be re-priced or the due date 0-3 Months
At Call
Financial Assets
1-5 Years
3 - 12 Months
Over 5 Years
No Interest
Total
-
-
-
-
-
4,017
4,017
147
59,107
-
-
-
4,272
63,526
Cash
Interbank and Money Market Items
Securities Purchased under Resale
Agreement
-
-
-
-
-
-
-
Investment
-
1,877
7,448
11,316
575
5,612
26,828
Loans
50,803
6,276
11,880
162,548
40,508
910
272,925
50,950
67,260
19,328 173,864
41,083
14,811
367,296
Total Financial Assets
Financial Liabilities Deposits Interbank and Money Market Items
76,547
108,104
85,482
42
-
657
270,832
5,432
1,211
388
-
-
638
7,669
Debts repayments at call
-
-
-
-
-
1,317
1,317
Borrowings
2
38,750
9,176
9,360
5,000
-
62,288
81,981
148,065
95,046
9,402
5,000
2,612
342,106
Total Financial Liabilities
Based on the aforementioned changes in financial assets and liabilities structure, the Bank’s net interest income within one year period would decrease if the market interest rate were to increase. This was mainly due to the Bank’s hire purchase business expansion which featured with a fixed rate. 2.3 Exchange Rate Risk The exchange rate risk is a risk to the Bank’s earnings or capitals which can be adversely affected by the fluctuations in exchange rates as a result of its foreign exchange transactions or its possession of assets or liabilities in foreign currencies. The exchange rate risk can be divided into Transaction Risk, and Translation Risk. The Asset and Liability Management Committee (ALCO) is responsible for monitoring and controlling this type of risk, by considering the proper matching between the structure and the maturity of assets and liabilities in foreign currencies. The Bank has also established the policy in determining the risk ceiling in controlling the effect of changing exchange rate on earnings and capitals, using the VaR model as a risk measurement tool. Nevertheless, in order to prevent the risk that may arise, the Bank has a hedging policy, by using financial instruments such as forward contracts. As of 31 December 2008, the Bank faced with the low exchange rate risk, since most of the assets in foreign currencies have been hedged by forward contracts. 3. Liquidity Risk Liquidity risk arises from the Bank’s inability to repay its debts or honor its obligations when they become due, as it is unable to convert its assets into cash or to mobilize adequate funds or to mobilize funds at an acceptable cost. The failure will have an adverse impact on the Bank’s capital fund both in the present and in the future. The risk management mechanisms will start from an assessment of the Bank’s cash flows and the liquidity position for each period in which the Bank might require different levels of funds to
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
79
accommodate loan repayments upon maturity, to redeem other types of liabilities, or to acquire additional assets. With the use of tools such as the Liquidity Gap Analysis Model, various liquidity ratios, as well as the simulation under “what if” scenarios, the Bank can analyze impacts on liquidity sufficiency, given the cash flows which in turn depends on customer behavior in extending the contract at maturity date. Moreover, the Bank also estimated the liquidity demand under different assumptions of economic situations and some unusual scenarios that may affect the Bank itself or the overall financial system. Also, the Bank has established and conducted the contingency plan for any kind of liquidity crisis scenarios and reviewed the plan as necessary when situation changed. In this regards, the Asset and Liability Management Committee, who is responsible for the control and monitoring of liquidity and interest rate risks, hold a meeting weekly to monitor and manage such risk. The structure of the Bank’s capital funds can be classified by different type and maturity of source of funds as follows: (Unit: Million Baht)
2008
Deposits
Percent
79.47
189,086
71.39
7,662
2.25
3,798
1.43
7
-
7
-
62,288
18.28
71,958
27.17
340,789
100.00
264,849
100.00
Foreign Interbank and Money Market Items
Total
2007
270,832
Domestic Interbank and Money Market Items Borrowing
Percent
Funds Classified by Maturity of Sources of Funds (Unit: Million Baht)
2008
Percent
2007
Percent
Less than 1 Year
325,015
95.37
250,522
94.59
More than 1 Year
15,774
4.63
14,327
5.41
340,789
100.00
264,849
100.00
Total
As of 31 December 2008, the Bank’s deposits and borrowings amounted to 340,789 million baht. The Bank’s sources of funds were mostly from the public deposits with the maturity less than one year. This is a common structure of commercial banks’ sources of funds. Nevertheless, the Bank also issued bills of exchange and short-term debentures in order to increase the saving alternatives for customers.
80
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
The financial assets and liabilities as of 31 December 2008 classified by maturity date are as follows:
The Maturity Date of Financial Tools
items
Financial Assets Cash Interbank and Money Market Items Securities Purchased under Resale Agreement Investments
Loans
Total Financial Assets
More than 1 year
Not Specified
(Unit: Million Baht)
At call
Less than 1 year
4,017 4,419
- 59,107
- -
- -
4,017 63,526
- -
- 4,248
- 17,008
- 5,572
- 26,828
22,573
74,668
175,684
-
272,925
31,009
138,023
192,692
5,572
367,296
Total
Financial Liabilities Deposits 74,010 195,408 1,414 - 270,832 Interbank and Money Market Items 6,070 1,599 - - 7,669 Securities Purchased under Repurchase Agreement - - - - - Payable Liabilities on Call 1,317 - - - 1,317
Borrowings
Total Financial Liabilities
2
47,926
14,360
-
62,288
81,399
244,933
15,774
-
342,106
Off-Balance Sheet Items Avals - 106 12 - 118 Non-maturity P/N for Imported Product - 360 83 - 443 Letter of Credit 48 616 - - 664 Other Guarantees 3,071 - - - 3,071 Unpaid Overdraft 4,164 - - - 4,164 Total Off-Balance Sheets
7,283
1,082
95
-
8,460
As of 31 December 2008, the Bank’s liquidity, which consists of cash and bank deposits, money market lending, and investments in the government and state enterprise bonds, increased from the previous year. This accounted for 28.88 percent of total deposits, which is higher than the BOT’s minimum liquidity requirement of 6.00 percent of total deposits. This increase was mainly due to the increasing number of branches, providing expansion of customer base. 4. Operational Risk The operational risk is the risk that arises from the lack of appropriate governance of business affairs or lack of good corporate governance within the organization. Risk may also arise from the fact that the organization’s internal audit and internal control systems are not adequately efficient. The risk may be related to the internal operation processes, personnel, information technology systems or external events, which affect the Bank’s earnings and capitals as well as its reputation and credibility. There has been an intensified competition among commercial banks and other financial institutions providing similar financial services in the past year, together with the rapid enlargement in the number of Thanachart Bank’s branches as well as the improved effectiveness of the Bank’s service in order to provide full financial services with international standard. All these raised the Bank’s concern over the possible operation risks. As a result, the Bank placed emphasis on operation risks no less than other risks. The Bank thus established a number of measures to ensure adequate and appropriate internal control systems in accordance with the change in transaction features. In order to allow for fast and flexible operation whereas controlling
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
81
the operational risk within an acceptable level, the Bank has streamlined the internal work processes in coherence with each form of financial product services, with implemented measures as follows: • Regarding the organization structure, the Bank has clearly specified the role, the scope of duties and responsibilities for each job, based on a system of check and balance. The transactional function of the Front Office is separated from the Middle Office which monitors and controls the risk. The Middle Office comprises of the Risk Control Department and the Back Office. • The Bank has established transaction-supporting units which are independent and have expertise in their respective fields of work such as computer and information technology, legal, and price appraisal. This was in order to minimize any possible errors. • The Bank has put in writing procedures and regulations for every type of transaction, staff manuals as well as the authority hierarchy. The purpose is to make sure that all operations within the organization follow the same standard. • The Bank has established the Audit Committee and the Risk Management Committee. The purpose is to monitor and assess the Bank’s operational risks as well as to identify and correct errors so that the operations are more sound and efficient. • The Bank has also improved its information technology system management and information security system, in order to increase its potential in accommodating business expansion and to gain credibility from its customers in the aspect of technology and information. A particular focus was given to protection against damage caused by the access to information by unauthorized persons. • The Bank has established the selection procedures for outsourcing services, both operations and information technology systems. The purpose was to reduce the operational risk, enhance efficiency and gain operational credibility, subject to regulations of the Bank and other authorities concerned. • The Bank has formulated the Business Continuity Plan which consists of an emergency plan, a backup system plan and a business recovery plan. The purpose was to protect against business disruption. The Bank also conducted a drill to test the completeness of the plans and to improve the plans so that they could be efficiently implemented in practice. Regarding measurement of risk, the Bank calculates the capital adequacy to accommodate this risk based on the BOT’s announced Basic Indicator Approach in accordance with Basel II. Furthermore, in preparation for the business plan and Basel II implementation which will be strictly enforced by the state compliance unit in the future, the Bank has developed the database collecting the information of damage incurred from operation. The information from this database are used to develop tools to measure risk by the Standardized Approach and Advanced Measurement Approach which are more accurate measurement techniques and truly reflect the risk in each transaction. 5. Risk from Investments in Subsidiary and Associated Companies This type of risk arises from the investment in the subsidiary or associated companies, when the Bank’s earnings and capitals are adversely affected by shareholding or joint investments with the subsidiary and associated companies which suffered losses or went bankrupt. As of 31 December 2008, the Bank’s total investments in its subsidiary and associated companies amounted to 4,482 million baht, accounting for 16.86 percent of the Bank’s net investments. Its largest investment was in Thanachart Securities Public Company Limited, in which amounted to 1,858 million baht, representing 41.45 percent of the total investments in subsidiary and associated companies. Next in order was Thanachart Life Assurance Company Limited, in which amounted to 936 million baht, representing 20.88 percent of its total investments. Details of the Bank’s investments (cost method) in its subsidiary and associated companies as of 31 December 2008 are as follows: 82
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Investment Values in Subsidiary and Associated Companies (Cost Method) (Unit: Million Baht)
investment value
company’s name Thanachart Securities Public Company Limited Thanachart Insurance Company Limited Thanachart Life Assurance Company Limited Thanachart Fund Management Company Limited
2008
1,858 867 936 97
Thanachart Group Leasing Company Limited
400
Others
324
Total
4,482
6. Strategic Risk This type of risk arises from the formulation of strategies, business planning and implementation which are not suitable for or not in line with internal factors and external environment, resulting in an adverse impact on the Bank’s earnings, capitals or position. In managing the strategic risk, the Bank has arranged for the formulation of strategies for the next three years, with a revision at least once a year or whenever there is an external event that may have an impact on the achievement of its business goals. The Executive Committee is responsible for regular monitoring and evaluating the performance of various work units against the established targets in the annual plan. 7. Regulation Risk The risk arises from amendments or changes in regulations, laws or requirements of the authorities concerned, especially BOT. Such change in the authority’s policy may affect the Bank’s strategies and business operations. The Bank classified the impact from rules and regulations as follows: 7.1 Impact from the Depository Protection Agency (DPA) Act As the Depository Protection Agency Act became in effect since 11 August 2008, deposits in baht and foreign currencies at financial institutions no longer have the FIDF’s full blanket guarantee for total amount of both principal and interest. Instead, the scope of deposit guarantee is now clearly specified in terms of the maximum guarantee, insurance coverage, and type of deposit insured by law. Depositors will benefit from this Act, as they have to consider risks and keep a closer monitoring on financial institutions’ information and performance, rather than focusing only on returns. At the same time, each financial institution has to step up their operational efficiency in order to ensure a strong financial position and customers’ loyalty. During the early stage after the Act became in effect, the Bank faced some deposit withdrawal, but this did not affect the Bank’s liquidity at all. However, after a constant publicized scheme to build public understanding, together with the economic fluctuation towards the end of year, the government has extended the entire blanket guarantee for another three years. Depositors, therefore, gradually brought back deposits into the banks that they believed to be sound and strong. Nevertheless, in order to prevent the risk that may arise from the Act in the future, the Bank has increased the number of branches to expand retail customer base. The Bank has also developed products in both deposit and investment services to accommodate the need of major customers. Moreover, corporate governance was enhanced to build the long-term stability for the Bank as it helps minimize the effect from major customers’ deposit withdrawal when DPA Act eventually guarantees the maximum of only 1 million baht per account.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
83
7.2 Impact from the Financial Institution Business Act (FIBA) The BOT made an announcement on Financial Institution Business Act which became effective on 3 August 2008. The objective is to enhance the supervision on financial institutions such that their financial positions are sound with risk management system which meets the international standards. These are necessary conditions to earn public and depositors’ confidence on the overall financial system. In this regards, the Bank has revised and improved the overall risk management process in accordance with this Act. This was particularly important in the area of capital and asset holding, investment and business operation, as well as Consolidated Supervision for a business group. Certain business transactions are prohibited if they are considered to have conflict of interest, providing benefit to related persons. Nevertheless, the risk management is still under the organizational structure, which separates the Front Office from the Back Office in order to allow for check and balance. There are also other middle units such as Compliance Department, which controls the risk under the specified guideline before transaction occurs. 8. Risk rising from the capital adequacy As at 31 December 2008, the Bank’s capital funds amounted 28,247 million baht, of which 20,261 million baht was in Tier I and 7,986 million baht was in Tier II. The BIS ratio amounted to 11.18 percent which exceeded the BOT’s minimum requirement of 8.50 percent. This amount is sufficient to support potential risks and accommodate for the business expansion in the future.
84
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
CORPORATE SOCIAL RESPONSIBILITY
Apart from its business operations that place emphasis on maximizing shareholder return, Thanachart Group pays great attention to corporate governance and corporate social responsibility. Representing the Group’s main objectives, they are part of the CEO’s six-point agenda, which every work unit has to follow. Throughout its 28 years of business operations, Thanachart Group has taken a responsible attitude towards society. The Group believes that conducting its business affairs which are underpinned by a sense of social responsibility, will help to make its business more sustainable in the long term. Although there is not any compulsory requirement to do this, the Group has taken on the responsibility voluntarily. The top management of the Group has played an important role in promoting the principles of social responsibility. These principles fall under the umbrella of the Group’s corporate social responsibility (CSR) that places emphasis on “sustainable growth with moral righteousness”. Supported by its staff, business alliances, local communities and society, the Group is prepared to consistently participate in activities that support or help local communities and society in a long term manner with understanding and sincerity. In this regard, Thanachart Group’s socially responsible activities can be divided into two main categories as follows: 1. Socially Responsible Business The conduct of its business affairs with social responsibility is based on the principles of CSR that focus on “sustainable growth with moral righteousness”. Throughout its 28 years of business operations, Thanachart Group has strictly adhered to the principle of rejecting any business that is ethically questionable or socially harmful. Its mainstream business practices that reflect a sense of social responsibility include the following: 1.1 The conduct of business affairs of all member companies of Thanachart Group does not support any business or organization that is illegal or immoral. Nor do the companies involve themselves in such businesses or organizations. 1.2 Staff at all levels of Thanachart Group strictly adhere to ethical and moral principles. 1.3 In selling or offering any product or service, full information about its limitations or conditions has to be disclosed to customers from the outset clearly and completely. 1.4 Private information of customers has to be protected. As well, all the member companies strictly comply with the legal requirements relating to the private information of customers. 1.5 All staff is provided with a safe work environment. 1.6 The Group promotes energy conservation, environmental protection and a reduction in the use of paper to eliminate waste. 1.7 The Group promotes a reduction in the use of materials that cause air pollution or are harmful to health. 1.8 The Group supports the well-being of its staff. 2. CSR Activities The Group may initiate socially beneficial activities on its own or invite experts to help organize them. To achieve the objectives efficiently, it may have to establish relationships with stakeholders that can help implement the activities. It may also invite other groups of stakeholders to participate in the socially beneficial activities in order to achieve a broader impact. Furthermore, bearing in mind the benefits to be gained by the beneficiaries, the Group has adopted the beneficiary-centered approach in designing the activities. The CSR activities can be divided into three sub-categories as follows: ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
85
1
1. Mr. Vicha Kulkobkiat, Senior Vice President of Communication and Brand Management Division, Thanachart Bank, donated 300,000 baht to sponsor the purchase of bulletproof helmet
for scout volunteers who guard the border of Thailand-Cambodia.
2.1 Central CSR Activities The headquarters will be responsible for initiating and implementing these CSR activities with the support from its hubs in Bangkok and upcountry. The scope of Thanachart Group’s social responsibility is based on activities that are related to its businesses. As a general guideline for implementation, the activities can be divided into the following four main groups: (a) Education and youth development, (b) Creation of opportunities for the underprivileged in society, (c) Road traffic safety, (d) Environmental maintenance and protection. 2.2 Hub CSR Activities The objective is to make Thanachart Bank Public Company Limited an integral part of local communities and to create acceptance in the areas in which it operates its business. As a result, the activities undertaken by each hub are different. In designing the activities, the needs or culture of the local community will be taken into consideration. The activities initiated by each hub will be considered and approved by the headquarters. Each hub will be responsible for implementing the activities with the support of the headquarters. 2.3 CSR Activities of Member Companies of Thanachart Group The objective is to make all member companies of Thanachart Group taking part in CSR. In 2008, Thanachart Group spent 16 million baht on CSR. The expenditure can be divided into three main categories as follows: Hub CSR 3.90 million baht
Central CSR 11.60 million baht
The expense can also be classified by types of CSR activities supported by Thanachart Bank as follows: Environment 0.55 million baht or 3% Traffic Safety 0.80 million baht or 5% Health Care 0.90 million baht or 6% Social Contribution 6.50 million baht or 41%
86
CSR of Member Companies of Thanachart Group 0.50 million baht
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Religion 0.52 million baht or 3% Others 0.63 million baht or 4% Education and Youth Development 6.10 million baht or 38%
2
3
2. Mr. Suphadej Poonpipat, Chief Executive Officer of Thanachart Bank, donated 285,000 baht to support the purchase of medical equipments for the National Cancer Institute of Thailand with Doctor Theerawuth Khuhaprama, Head Director of National Cancer Institute, as a receiver. 3. Thanachart Bank employees conversing with an elder while participating in the Ban Bang Khae for Older Persons 2 visit, one of the “Ri Rerm..Term Tem” Project.
Major CSR Activities in 2008 Central CSR Activities Thanachart Bank’s central CSR activities in 2008 could be divided into two major groups including main activities under the “Ri Rerm..Term Tem” (Initiate and Fulfill) Project and other small-scale activities. Most central CSR activities are of a large scale with joint efforts put in by the headquarters, its branches and hubs nationwide. The key objective of Thanachart Bank’s CSR activities is to enable its staff, executives, customers and all concerned to participate in the activities and contribute whatever they can, both in cash and in kind. Ri rerm..Term tem (Initiate and Fulfill) Project-an activity to create opportunities for the underprivileged in the society “Initiate and Fulfill” Project is Thanachart Bank’s key CSR activity in 2008. The Project places emphasis on identifying the real needs of Thai society-something that the society actually lacks and needs. The objective is to make sure that the “contributions to be made” will fulfill the real needs. While Thanachart Bank makes its own contributions, it also acts as an intermediary for contributions by producing a short documentary called “Initiate and Fulfill by Thanachart Bank Year 1”. The purpose is to provide members of the general public as well as private and public organizations with an opportunity to make contributions to the underprivileged in various forms. In addition to cash donations, the contributions may take the form of tools, equipment, appliances or non-materials such as sharing of knowledge, love, friendliness, consideration and helpfulness. The contributions may also be in other forms that the donors are prepared to give. The documentary was broadcast as part of “Jood Plien” (Turning Point) Programme on TV Channel 9 (Modern Nine TV) at 13:00 hours every Saturday from October to December 2008. The documentary was also broadcast as part of “Khon Khon Khon” (variety/talk show) Programme on TV Channel 9 (Modern Nine TV) at 22:15 hours every Tuesday from January to February 2009. The Project has been a proven success with many organizations and foundations having received contributions from Thanachart Bank and other contributors. The recipients include, among others, the following: • National Cancer Institute of Thailand Thanachart Bank made a cash donation worth 285,000 baht to National Cancer Institute of Thailand for the purchase of highly advanced blood pressure gauges. They were used to diagnose patients afflicted with cancer. • Ban Bang Khae Social Welfare Development Center for Older Persons 2 Thanachart Bank organized physical activities for the elderly at Ban Bang Khae 2, who lacked support from their families. They were also given a free lunch. Many staff members of the Bank’s Petchakasem Hub participated in the activities which the elderly enjoyed very much.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
87
4
5
4. Mr. Vicha Kulkobkiat, Senior Vice President of Communication and Brand Management Division, Thanachart Bank, and Thanachart Bank presenters donated computers together with internet access to the children in Baan Nok Kamin Foundation to serve as a knowledge source in the occasion of “Ri Rerm..Term Tem” Project opening. 5. Mr. Suphadej Poonpipat, Chief Executive Officer of Thanachart Bank, donated 500,000 baht which was contributed by customers, employees and
the Bank to Associated Professor, Dr. Churee Wichitwathakarn, the Chairman of the Foundation for Slum Children Care.
• Foundation for Children with Disabilities (Soi Ladprao 47) The autistic and physically handicapped children at the Foundation need special clothing that facilitates their movement. As part of an organized activity, many staff members of Thanachart Bank’s Ratchadapisek Hub participated in making clothes for these children. • Mangrove Forestation (Operation and Learning Center, Mahachai East Coast, Tambon Kokkam, Amphur Muang, Samut Sakhon Province) The organized activity was aimed at inculcating a sense of concern in the staff and an affinity with nature. The participants learned how to grow mangrove trees properly so that their offspring would survive and not be washed away by the sea. This knowledge helped conserve the mangrove forest and protect the environment. • Foundation for Children (Amphur Sampran, Nakhon Pathom Province) The Foundation looks after more than one hundred orphans. During the rainy season, washing nappies and clothes are often troublesome. Dealing with damp clothes also presents a big problem. As a result, Thanachart Bank has donated washing and drying machines to the Foundation. • Thai Blind People’s Foundation (Soi Boonyu, Dindaeng Road) The Foundation has built up its own audio library for the blind. The visually impaired can study by listening to audiobooks in the form of CDs available at the library. As part of the related activity, Thanachart Bank donated CDs for recordings to the Foundation. Some staff members of the Bank also assisted in producing audiobooks for visually handicapped persons. Moreover, Thanachart Bank made a cash donation to the “white walking stick” project. The proceeds from the donation would be used to buy walking sticks and distribute them to the visually handicapped people living in Petchaburi Province. • Presenting monks with dentures (Monks Hospital) The activity demonstrates another means of merit-making at Monks Hospital, in addition to offering food to the monks. One of the things which old monks need most is dentures. They enable the monks to eat a normal diet and give a sermon as before. • Vocational Training for Veterans (Veterans General Hospital) The activity helps make the public aware of the fact that, in addition to treating patients, Veterans General Hospital provides the physically handicapped veterans with vocational training, the expenses of which are not normally covered by the regular budget. Thanachart Bank made a cash donation worth 20,000 baht. • Baan Nok Kamin Foundation Baan Nok Kamin Foundation helps care for children who have no family. They range from infants to teens. The Foundation also provides them with education so that they will not become a burden on society. To support the Foundation’s worthy causes, Thanachart Bank donated two computers with Internet access. The equipment would enable the children at Baan Nok Kamin Foundation to access a resource of online information and acquire knowledge under the supervision of teachers.
88
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
6
7
6.-7. Mr. Suphadej Poonpipat, Chief Executive Officer of Thanachart Bank, donated 20 scholarships to exemplary students who lack financial support and awarded 5 schools in Nakhon Sithammarat province with financial
aids for academic and athletic support in the occasion of presenting Royal Kathin Robes at
Wat Phra Mahathat Woramahawiharn Temple, Nakhon Si Thammarat province.
Other CSR Activities • Donations to Foundation for Slum Child Care under the Royal Patronage of HRH Princess Galyani Vadhana Krom Luang Naradhiwas Rajanagarindra Thanachart Bank delivered donations worth 500,000 baht in total to Foundation for Slum Child Care. The proceeds of the donations were collected from Thanachart Bank, its customers, executives, and staff. A donation box was placed at all of its branches for those who were interested in making donations to Foundation for Slum Child Care. The Bank has been giving its support to the Foundation for years, which included, among others, donations of a small bus for a mobile library service, cash donations, basic necessities for children, washing machines, as well as offers of food to children by its staff members during important festivals. • Main Supporter of “123 Unity Thailand 2008” Project Thanachart Bank and Thai PBS Channel were major sponsors of “123 Unity Thailand 2008” Project which aimed at promoting classical music among the youth. They were given opportunities to practice and play classical music under the expert guidance of several well-known conductors including Mr. Bundit Ungrangsee, the world’s top conductor. The activity helped develop and raise the professional standards of young Thai musicians to a level on par with international standards. The Project also featured a music camp where a selected group lived together for almost one week for the purpose of learning and developing their skills in classical music. They were also given an opportunity to practice for a concert and participated in an orchestra performance given at Thammasart Auditorium which attracted great public interest. • Presentation of Royal Krathin Robes and Making Cash Donations to Schools and Students Thanachart Bank and other member companies of Thanachart Group jointly hosted the presentation of royal Krathin robes at Wat Phra Mahathat Woramahawiharn, Amphur Muang, Nakhon Si Thammarat for the year 2008. In this connection, cash donations for educational purposes were also made to five schools. In addition, scholarships were granted to 20 students. The total donations collected from the customers, executives, and staff of member companies of Thanchart Group amounted to 4,819,181.80 baht. • Supporting One-Thousand-Baht-One-Birthday Project of Chulalongkorn University Alumni, which was initiated by Her Royal Highness Princess Maha Chakri Sirindhorn Thanachart Bank contributed in the donations for the Project, the proceeds of which were given to a charity fund started by His Majesty the King, in commemoration of the celebrations on the auspicious occasion of His Majesty the King’s Birthday Anniversary on 5th December. All branches of Thanchart Bank served as a channel, through which those interested in participating in the donations for the Project could make their contributions. Hub CSR Activities Thanachart Bank has altogether 22 hubs nationwide - both upcountry and in Bangkok and its vicinities. The local needs and culture of these hubs are different. As a result, each of them initiated their own CSR projects, taking into consideration the results of local needs assessments. Supported by the CSR Committee, the central unit is responsible for approving and administering these projects. The activities implemented by hubs in 2008 included the following:
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
89
8
8. Mr. Udom Chaiyathep, Assistant Vice President of Northern Hub 1 (Chiangmai), Thanachart Bank, donated 200 bicycles for children in the scarce area in Chiangmai Province to commute to school.
• Chiangmai Hub: “Bicycles for young children” Project A total of 200 bicycles were given to rural schools located in Amphur Jomthong and Amphur Fang in Chiangmai Province. Students who lived far away from the schools could borrow the bicycles and ride them to school and back. Enjoying the convenience, the students spent less time on commuting between the school and their home. The project also helped maintain these bicycles in good condition. Moreover, customers, executives, and staff members of Thanachart Group came together to donate coats, blankets, and learning equipments to those schools. • Phuket Hub: “Thanachart building conserves environment” Project The hub supported the construction of a multi-purpose building for Ban Pa Yang School located in the rural area of Amphur Muang, Phang Nga Province. The building was used for both educational and recreational activities of the students, as well as for activities of local communities around the school. Staff members of the hub also helped the local communities in the construction of the building. • Khon Kaen Hub: “Blood donation Year 1 (2008) for Mother of the Nation on the auspicious occasion of Her Majesty the Queen’s Birthday” Project and “Blood donation Year 2 (2008) for Father of the Nation on the auspicious occasion of His Majesty the King’s Birthday” Project The projects received support from Thai Red Cross Society, hospitals, Khon Kaen Center, Central Blood Bank, and the Faculty of Medicine of Khon Kaen University. Receiving 248,300 cc of blood in total, the blood donating activity is in its 6th year. In addition, Thanachart Bank provided blood donors with free physical medical checkups, blood checks, as well as personal finance checkups. The blood donors were also given seedlings, from which they could grow trees to conserve the environment. • Nakhon Sawan Hub, Ayuthaya Hub, Phitsanulok Hub: Survival bags for flood victims To help alleviate the plight of flood victims in Nakorn Sawan, Ayuthaya, Phitsanulok province in Amphur Wang Thong, Amphur Ma Prang, Amphur Charttrakarn, and Lop Buri province in Amphur Muang, Amphur Kok Samrong, and Amphur Ban Mee, 4,000 survival bags were given by Nakorn Sawan Hub, Ayuthaya Hub, and Phitsanulok Hub. • Hat Yai Hub: “Thanachart cares children ware safety helmet Year 2” Project The project launched a campaign encouraging elementary school students who commuted to school on the back of their parent’s motorcycles to wear safety helmets in order to reduce traffic accidents. 1,200 crash helmets were given to students in schools located in Songkhla Province. The participating schools also helped set aside storage space for keeping the helmets. As well, the traffic police organized a training activity for the parents, teaching them how to drive motorcycles safely. • Surat Thani Hub: “Thanachart Cup 1” Project The project promoted soccer playing among young people. Importantly, it helped inculcate the wise use of leisure time into the young people and encouraged them to stay away from drugs. As the soccer events were very popular among the local communities, the project represented a good opportunity to produce soccer stars at a provincial level. It was hoped that some of them could develop themselves into stars at a national level in the future. A total of 24 teams participated in the soccer competition that lasted for five weeks in total. 90
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
9
10
9. Mr. Nophadon Ruengchinda, Managing Director of Thanachart Insurance Company, as the representative of Thanachart Insurance Company and Thanachart Bank donated a total of 150,000 baht to Pediatric Cardiac Surgery Foundation, Institute of Cardio Vascular Disease, Rajvithi Hospital, with Miss Chintana Treengern, Assistant Director and Secretariate of the Foundation, as
a receiver. 10. Southern Hub 4 (Hat Yai) of Thanachart Bank has organized a campaign entitled “Thanachart Bank Cares, Children Wear Safety Helmets.”
The Hub donated 1,200 safety helmets to the children in Songkhla Province to encourage parents to recognize the importance of their children’s safety and to reduce accidents for
the students who commute with motorcycle.
• Ngam Wong Wan Hub: “Ride bicycles to fight air pollution and global warming” Project The Project built parking lots for bicycles at various places in several localities of Nonthaburi Municipality. The purpose was to provide greater convenience to members of the public who commuted by bicycle. The Project also launched a campaign aimed at encouraging members of the public to commute by bicycle in order to fight global warming. It was part of the on-going project which had been jointly implemented in various formats for many years by the Hub and Nonthaburi Municipality in order to fight global warming. Among the activities organized previously were “Beautiful Canal...Clean Water” Project and “Cool Earth in Nonthaburi Municipality” Project. CSR Activities of Member Companies of Thanachart Group Thanachart Insurance Company Limited donated 100,000 baht in cash to Pediatric Cardiac Surgery Foundation (PCSF) of Rajavithi Hospital. The proceeds of the donation were for treating children with heart disease, particularly those suffering congenital heart disease and requiring cardiac surgery without delay. Thanachart Life Assurance Company Limited under its project entitled “Ri Rerm Term Rak” (Initiate and Fulfill with Love), supported students who had good academic records but lacked financial resources. A total of 60 scholarships were awarded to students studying at the secondary education levels (Matayomsuksa Levels 1-6) at schools under the jurisdiction of the Department of General Education. The scholarships would pay for the education of the same students from Matayomsuksa Level 1 to Level 6. Thanachart Securities Public Company Limited established a CSR project entitled “Help Young th Ones (4 Year)”. The Project received cash donations worth 290,593 baht as well as educational materials and textbooks, which were delivered to Ban San Heep School in Sukhothai Province. The proceeds of the donations were used for renovating the dormitory for students who lived far away from the school as well as for those students who had to live in the school regularly. The proceeds were also used for renovating the library as well as building more toilets for the school.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
91
RESPONSIBILITIES OF THE BOARD OF DIRECTORS FOR FINANCIAL REPORT
Thanachart Bank’s Board of Directors is responsible for the separate and consolidated financial statements of Thanachart Bank Public Company Limited and its subsidiaries and for financial information presented in this annual report. The aforementioned financial statements were prepared in accordance with the generally accepted accounting principles, applying appropriate and consistent accounting policies and with careful judgments and best estimates. Important information is adequately and transparently disclosed to Thanachart Bank’s shareholders and other investors in the notes to financial statements. Thanachart Bank’s Board of Directors has established and maintained appropriate and effective risk management and internal control system in order to rationally assure that the accounting information is correctly and completely recorded and adequate to sustain Thanachart Bank’s assets, as well as to prevent any material irregular operation or fraud. Thanachart Bank’s Board of Directors has appointed an Audit Committee comprising of independent directors responsible for revision of accounting policies and the quality of financial statements, internal control, internal audit and risk management system, as well as the disclosure of related party transaction. The Committee’s comments on these issues are included in the Audit Committee Report in this annual report. Thanachart Bank’s separate and consolidated financial statements of Thanachart Bank and its subsidiaries were audited by the Certified Public Auditor of Ernst & Young Office Limited. Thanachart Bank’s Board of Directors had provided the auditing team all information and document supports in order that the Auditor would be able to audit and address his/her opinion to the auditing standards. The Auditor’s opinion included in the Report of Independent Auditor in this annual report. Thanachart Bank’s Board of Directors is of the Opinion that Thanachart Bank’s overall internal control is at a satisfying level and provides reliability on Thanachart Bank’s separate and consolidated financial statements of Thanachart Bank and its subsidiaries for the year ended 31 December 2008 which is in compliance with the generally accepted accounting principles and relevant rules and regulations. Mr. Banterng Tantivit Mr. Suphadej Poonpipat Chairman Chief Executive Officer
92
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of Thanachart Bank Public Company Limited consists of three independent directors who are highly qualified and have extensive experience in the banking industry. The Committee is also supported by the Senior Vice President of the Internal Audit Division who serves as secretary. The names of the Committee’s members are as follows: 1. Mr. Kiettisak Meecharoen Chairman of the Audit Committee, 2. Mr. Suvit Arunanondchai Member of the Audit Committee, 3. Mr. Sathaporn Jinachitra Member of the Audit Committee, and 4. Mr. Chatchawal Jantararuangtong Secretary of the Audit Committee The Audit Committee is responsible for carrying out the duties as assigned by Thanachart Bank’s Board of Directors in line with the requirements imposed by the regulating authorities concerned. The duties, as stated in the charter stipulated by the Board of Directors, include reviewing of financial statements, good corporate governance, internal control systems, risk management systems, compliance with the requirements of the authorities and etc. The Audit Committee’s tools in performing its duties consist of the Internal Audit Division and the Compliance Department, both of which report directly to the Audit Committee. As a result, the Committee is able to perform its duties independently in line with the legal requirements and the principles of good corporate governance in a transparent manner, in order to properly protect the interests of the organization without any limitation imposed on the information to be received. Throughout 2008, the Audit Committee received full cooperation from the management as well as the staff concerned. Also in 2008, the Committee held 10 meetings in total with the auditor, the internal auditor and Thanachart Bank’s management. The Audit Committee reviews the quarterly and year-end financial statements by discussing them with the auditors and Thanachart Bank’s management. The objective is to ensure the full and proper disclosure of financial information, with special attention being paid to Thanachart Bank’s transactions with related parties. The Audit Committee also performs other reviews, ensuring that the internal control systems and the internal audits are efficient. The Committee discusses the matters with the internal auditor and helps formulate and approve the annual audit plan that covers overall audits, loan reviews, information systems audits, as well as quality and service audits. The Committee monitors and evaluates the implementation of the audit plan quarterly. As regards the compliance with legal requirements, the Committee closely monitors the performance of the Compliance Department, ensuring that the conduct of business affairs is in compliance with the requirements imposed by the authorities concerned, which include, among others, those imposed by the Bank of Thailand, the Office of Securities and Exchange Commission, and the Securities and Exchange of Thailand. In relation to risk management, the Committee pays special attention to management of credit risk, market risk, liquidity risk, and operational risk. The Committee fully realizes that economic, political and social changes could cause significant impacts on Thanachart Bank’s risk management. As a result, the Committee performs reviews to ensure that Thanachart Bank puts in place adequate and concrete measures to properly deal with these risk factors. The Audit Committee participated in the meetings of the Board of Directors, in order to become informed of the performance of various work units including the subsidiaries, and to monitor results of the implementation of various corrective measures. In conclusion, after having evaluated all the areas audited, the Audit Committee is of the opinion that Thanachart Bank has disclosed financial information in its financial statements fully and accurately. The Bank also has adequate and efficient audit systems, internal control systems, corporate governance and risk management as well as appropriate measures to deal with the risks. Moreover, the Bank has strictly complied with the regulations and requirements imposed by the authorities concerned. As well, the Audit Committee is of the opinion that Ernst & Young Office Limited should be retained as Thanachart Bank’s auditor for another year, taking into account the fact that the auditor is well recognized as one of the country’s leading auditors. Importantly, the auditor also has a good understanding of the business and is supported by well qualified and experienced staff. As a result, it is deemed appropriate that Thanachart Bank propose to shareholders the appointment of Ernst & Young Office Limited as Thanachart Bank’s auditor for the year 2009. Kiettisak Meecharoen Chairman of the Audit Committee ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
93
REPORT OF INDEPENDENT AUDITOR
To the Shareholders of Thanachart Bank Public Company Limited I have audited the accompanying consolidated balance sheets of Thanachart Bank Public Company Limited and its subsidiaries as at 31 December 2008 and 2007, the related consolidated statements of income, changes in shareholders’ equity and cash flows for the years then ended, and the separate financial statements of Thanachart Bank Public Company Limited for the same periods. These financial statements are the responsibility of the management of the Bank as to their correctness and the completeness of the presentation.
My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Thanachart Bank Public Company Limited and its subsidiaries and of Thanachart Bank Public Company Limited as at 31 December 2008 and 2007, the results of their operations and cash flows for the years then ended, in accordance with generally accepted accounting principles.
Ratana Jala Certified Public Accountant (Thailand) No. 3734
Ernst & Young Office Limited Bangkok: 23 February 2009
94
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
BALANCE SHEETS Thanachart Bank Public Company Limited and its subsidiaries
Thanachart Bank Public Company Limited and its subsidiaries
As at 31 December 2008 and 2007
Balance sheets As at 31 December 2008 and 2007
(Unit: Baht)
Note
Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
Assets Cash Interbank and money market items
4,017,954,398
3,274,606,674
4,017,430,303
3,274,344,083
40,959,771,517
1,181,556,876
39,046,395,525
2,729,634
3,875,410,865
3,094,203,371
3,776,554,928
2,884,499,724
20,372,080,617
35,600,519,727
20,372,080,617
35,600,519,727
495,714,325
181,005,967
495,714,325
181,005,967
6
Domestic Interest bearing Non-interest bearing Foreign Interest bearing Non-interest bearing Total interbank and money market items - net
65,702,977,324
40,057,285,941
63,690,745,395
38,668,755,052
7
-
2,500,000,000
-
2,500,000,000
Current investments - net
8
6,927,882,970
4,185,576,423
4,276,135,274
1,088,424,357
Long-term investments - net
8
22,700,626,160
17,861,124,482
17,828,463,614
14,584,641,555
Investments in subsidiary companies
9
-
-
4,481,643,114
4,294,857,378
Investments in an associated company
10
1,083,135,083
1,125,124,314
-
-
30,711,644,213
23,171,825,219
26,586,242,002
19,967,923,290
50,185,586
243,570,360
-
-
274,034,052,128
226,642,955,365
272,925,468,442
224,940,273,409
Securities purchased under resale agreements Investments
Net investments Receivables from clearing house Loans and accrued interest receivables
11
Loans Securities business receivables Total loans and receivables Accrued interest receivables Total loans and accrued interest receivables Less: Allowance for doubtful accounts Revaluation allowance for debt restructuring
2,107,940,234
2,133,511,254
-
-
276,141,992,362
228,776,466,619
272,925,468,442
224,940,273,409
287,850,610
209,110,912
302,482,037
209,114,136
276,429,842,972
228,985,577,531
273,227,950,479
225,149,387,545
12
(7,066,943,508)
(5,037,359,876)
(6,365,168,503)
(4,522,130,101)
13
(19,963,190)
(10,156,754)
(19,963,190)
(10,156,754)
Net loans and accrued interest receivables
269,342,936,274
223,938,060,901
266,842,818,786
220,617,100,690
Property foreclosed - net
15
1,600,485,678
1,423,852,044
1,541,311,290
1,406,075,231
Land, premises and equipment - net
16
2,310,543,615
2,086,877,878
2,014,653,535
1,782,616,102
Intangible assets - software - net
17
416,748,531
212,564,385
377,231,891
176,394,091
398,585,716
1,095,085,586
387,623,893
1,060,238,117
1,369,064,034
364,009,659
1,369,064,034
364,009,659
2,426,164,851
2,419,004,398
1,445,364,792
1,280,083,812
378,347,290,220
300,786,743,045
368,272,485,921
291,097,540,127
Value added tax receivables Financial derivatives assets Other assets - net
18
Total assets
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
95
BALANCE SHEETS (CONTINUED) Thanachart Bank Public Company Limited and its subsidiaries
Thanachart Bank Public Company Limited and its subsidiaries As at 31 December 2008 and 2007
Balance sheets (continued) As at 31 December 2008 and 2007
(Unit: Baht)
Note
Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
Liabilities and shareholders' equity Deposits
19
Deposits in Baht
270,092,868,130
Deposits in foreign currencies Total deposits Interbank and money market items
188,031,698,747
270,761,410,331
188,457,800,679
70,367,617
628,475,240
70,367,617
628,475,240
270,163,235,747
188,660,173,987
270,831,777,948
189,086,275,919
6,677,346,941
3,113,197,476
7,030,389,032
3,144,743,140
607,106,923
588,938,459
631,885,020
654,018,161
20
Domestic Interest bearing Non-interest bearing Foreign Non-interest bearing
6,450,786
6,679,965
6,450,786
6,679,965
7,290,904,650
3,708,815,900
7,668,724,838
3,805,441,266
Payable to clearing house
294,804,300
-
-
-
Securities business payable
854,589,048
1,243,919,399
-
-
1,316,693,276
1,329,027,334
1,316,693,276
1,329,027,334
Short-term borrowings
47,079,799,561
59,532,967,154
47,928,299,561
58,997,967,154
Long-term borrowings
14,070,000,000
12,670,000,000
14,360,000,000
12,960,000,000
Total borrowings
61,149,799,561
72,202,967,154
62,288,299,561
71,957,967,154
Accrued interest payable
1,720,880,715
1,429,147,279
1,735,303,962
1,439,220,424
Unearned premium reserve
1,465,630,973
1,207,394,714
-
-
Life premium reserve
7,821,623,453
5,593,424,455
-
-
125,290,774
227,122,846
-
-
1,057,044,647
1,035,252,234
594,392,205
551,636,738
296,261,316
59,154,151
296,261,316
59,154,151
Total interbank and money market items
Liability payable on demand Borrowings
21
Corporate income tax payable Accrued expenses Financial derivatives liabilities Other liabilities
22
Total liabilities
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
96
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
3,449,435,007
3,110,119,210
2,270,662,998
2,173,669,080
357,006,193,467
279,806,518,663
347,002,116,104
270,402,392,066
BALANCE SHEETS (CONTINUED) Thanachart Bank Public Company Limited and its subsidiaries
Thanachart Bank Public Company Limited and its subsidiaries As at 31 December 2008 and 2007
Balance sheets (continued) As at 31 December 2008 and 2007
(Unit: Baht)
Note
Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
Shareholders’ equity Share capital Registered 2,134,619,292 ordinary shares of Baht 10 each
21,346,192,920
21,346,192,920
21,346,192,920
21,346,192,920
17,346,192,920
17,346,192,920
17,346,192,920
17,346,192,920
2,100,694,232
2,100,694,232
2,100,694,232
2,100,694,232
321,677,996
100,168,306
242,692,625
70,775,754
(1,387,121,442)
(397,022,334)
(537,861,364)
(382,732,553)
(123,378,934)
(123,378,934)
192,648,978
Issued and paid-up share capital 1,734,619,292 ordinary shares of Baht 10 each Share premium Revaluation surplus on investments
23
Revaluation deficit on investments
23
Surplus from business combination under common control
-
-
127,432,979
192,648,978
127,432,979
2,827,480,089
1,769,082,216
1,926,002,426
1,432,784,729
21,278,193,839
20,923,169,385
21,270,369,817
20,695,148,061
62,902,914
57,054,997
-
-
Retained earnings Appropriated - statutory reserve
24
Unappropriated Equity attributable to the Bank’s shareholders Minority interest - equity attributable to minority shareholders of subsidiaries Total shareholders’ equity Total liabilities and shareholders’ equity
Off-balance sheet items - commitments
21,341,096,753
20,980,224,382
21,270,369,817
20,695,148,061
378,347,290,220
300,786,743,045
368,272,485,921
291,097,540,127
36.1
Aval to bills
118,025,575
23,887,500
118,025,575
23,887,500
Liability under unmatured import bills
442,517,702
25,150,252
442,517,702
25,150,252
Letter of credits
664,174,238
399,286,956
664,174,238
399,286,956
86,515,586,525
74,645,655,880
85,870,136,525
74,617,605,880
Other commitments
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
97
INCOME STATEMENTS Thanachart Bank Public Company Limited and its subsidiaries
Thanachart Bank Public Company Limited and its subsidiaries For the years ended 31 December 2008 and 2007
Income statements For the years ended 31 December 2008 and 2007
(Unit: Baht)
Note
Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
Interest and dividend income Loans
4,098,944,380
4,475,775,639
4,228,235,051
4,527,986,319
Interbank and money market items
1,560,373,020
1,221,581,467
1,511,618,302
1,182,708,658
13,785,249,666
10,649,049,648
13,063,100,782
10,370,457,937
1,242,938,651
1,142,001,291
1,093,672,064
1,042,335,490
20,687,505,717
17,488,408,045
19,896,626,199
17,123,488,404
7,031,405,854
7,148,024,797
7,046,294,803
7,153,899,220
184,099,419
122,753,156
191,132,692
124,118,073
1,501,767,160
1,268,306,594
1,496,998,818
1,244,087,520
Hire purchase and financial lease Investments Total interest and dividend income Interest expenses Deposits Interbank and money market items Short-term borrowings Long-term borrowings Total interest expenses Net interest and dividend income Bad debts and doubtful accounts
27
Loss on debt restructuring
680,371,227
857,139,635
694,033,556
864,008,128
9,397,643,660
9,396,224,182
9,428,459,869
9,386,112,941
11,289,862,057
8,092,183,863
10,468,166,330
7,737,375,463
(3,954,737,499)
(2,692,162,099)
(3,538,740,996)
(2,605,588,978)
(13,351,891)
(334,730)
(8,887,990)
(334,730)
Net interest and dividend income after bad debts and doubtful accounts and loss on debt restructuring
7,321,772,667
5,399,687,034
6,920,537,344
5,131,451,755
756,390,129
440,710,392
-
-
(419,893,430)
82,694,749
153,064,461
79,185,366
Non-interest income Brokerage fees Gain (loss) on investments
28
(205,721,519)
71,007,509
Share of income from investments accounted for under equity method
-
-
Fees and service income Acceptances, aval and guarantees
34,500,005
21,780,855
34,500,005
21,780,855
546,603,335
731,709,084
709,135,259
760,018,855
1,509,705,205
850,858,467
920,090,923
581,007,416
222,700,412
50,306,537
222,732,024
50,308,740
7,342,635,671
3,364,686,019
-
-
Income on supporting service
143,101,123
251,698,582
291,491,983
320,529,064
Other income
411,577,164
237,487,708
313,633,302
200,071,925
10,700,384,075
6,111,117,759
2,285,861,977
2,004,724,364
Discounted income on insurance premium Others Gain on exchanges and financial derivatives contracts Insurance premium/Life insurance premium income
Total non-interest income
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
98
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
INCOME STATEMENTS (CONTINUED) Thanachart Bank Public Company Limited and its subsidiaries
Thanachart Bank Public Company Limited and its subsidiaries For the years ended 31 December 2008 and 2007
Income statements (continued) For the years ended 31 December 2008 and 2007
(Unit: Baht)
Note
Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
Non-interest expenses Personnel expenses
3,576,085,688
2,335,315,342
2,645,023,497
1,825,395,763
Premises and equipment expenses
1,361,972,111
945,455,955
1,051,842,940
802,562,619
Taxes and duties
200,288,283
315,283,402
189,075,951
310,511,458
Fees and charges
257,774,596
162,375,521
53,262,407
44,928,819
29
21,217,662
9,959,534
14,642,663
7,869,534
30
85,154,344
66,844,464
83,656,567
63,719,090
Directors’ remuneration Loss on disposal of property foreclosed and other assets Contribution fee to the Financial Institutions
822,569,724
814,591,364
822,569,724
814,591,364
Insurance/Life insurance expenses
Development Fund/Deposit Protection Agency
5,815,964,410
2,859,280,528
-
-
Other expenses
3,394,388,347
2,395,617,280
2,928,084,894
2,235,042,955
15,535,415,165
9,904,723,390
7,788,158,643
6,104,621,602
2,486,741,577
1,606,081,403
1,418,240,678
1,031,554,517
Total non-interest expenses Income before income tax Corporate income tax
31
(688,290,185)
Corporate income tax refundable
31
101,889,524
-
101,889,524
-
1,900,340,916
1,346,581,778
1,304,319,992
990,602,606
1,869,500,168
1,326,900,093
1,304,319,992
990,602,606
30,840,748
19,681,685
-
-
1,900,340,916
1,346,581,778
1,304,319,992
990,602,606
1.08
0.84
0.75
0.63
1,734,619,292
1,583,999,082
1,734,619,292
1,583,999,082
Net income for the year
(259,499,625)
(215,810,210)
(40,951,911)
Net income attributable to The Bank Minority interests of the subsidiaries
Earnings per share
32
Basic earnings per share
Weighted average number of ordinary shares (shares)
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
99
100
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
-
Income recognised directly in equity
Net income for the year
Total income for the year
Dividend paid (Note 26)
statutory reserve (Note 24)
-
Income (expenses) recognised directly in equity
Net income for the year
Total income (expenses) for the year
Dividend paid (Note 26)
statutory reserve (Note 24) 17,346,192,920
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
Balance - as at 31 December 2008
-
-
Increase in revaluation deficit on investments
Transfer of retained earnings to
-
17,346,192,920
Increase in revaluation surplus on investments
Balance - as at 1 January 2008
17,346,192,920
Balance - as at 31 December 2007
minority shareholders of subsidiaries
Minority interest - equity attributable to
-
-
Decrease in revaluation deficit on investments
Transfer of retained earnings to
-
2,100,694,232
-
-
-
-
-
-
-
2,100,694,232
2,100,694,232
-
-
-
-
-
-
-
-
-
1,759,796,584
2,762,632,000
-
340,897,648
321,677,996
-
-
221,509,690
-
221,509,690
-
221,509,690
100,168,306
100,168,306
-
-
-
81,391,369
-
81,391,369
-
81,391,369
-
-
18,776,937
investments
share capital 14,583,560,920
surplus on
paid-up Share premium
Revaluation
Issued and
Increase in revaluation surplus on investments
common control
Surplus from business combination under
Increase from share capital issuance
Balance - as at 1 January 2007
For the years ended 31 December 2008 and 2007
Statements of changes in shareholders' equity
Thanachart Bank Public Company Limited and its subsidiaries
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(1,387,121,442)
-
-
(990,099,108)
-
(990,099,108)
(990,099,108)
-
(397,022,334)
(397,022,334)
-
-
-
136,055,059
-
136,055,059
136,055,059
-
-
-
(533,077,393)
investments
deficit on
Revaluation
(123,378,934)
-
-
-
-
-
-
-
(123,378,934)
(123,378,934)
-
-
-
-
-
-
-
-
(123,378,934)
-
-
common control
combination under
business
Surplus from
192,648,978
65,215,999
-
-
-
-
-
-
127,432,979
127,432,979
-
49,530,131
-
-
-
-
-
-
-
-
77,902,848
statutory reserve
2,827,480,089
(65,215,999)
(745,886,296)
1,869,500,168
1,869,500,168
-
-
-
1,769,082,216
1,769,082,216
-
(49,530,131)
(218,753,413)
1,326,900,093
1,326,900,093
-
-
-
-
-
710,465,667
Unappropriated
Retained earnings Appropriated -
Consolidated financial statements
-
-
-
-
-
-
62,902,914
-
(24,992,831)
30,840,748
30,840,748
-
-
-
57,054,997
57,054,997
37,373,312
-
-
19,681,685
19,681,685
interest
Minority
21,341,096,753
-
(770,879,127)
1,131,751,498
1,900,340,916
(768,589,418)
(990,099,108)
221,509,690
20,980,224,382
20,980,224,382
37,373,312
-
(218,753,413)
1,564,028,206
1,346,581,778
217,446,428
136,055,059
81,391,369
(123,378,934)
4,522,428,584
15,198,526,627
Total
(Unit: Baht)
For the years ended 31 December 2008 and 2007
Thanachart Bank Public Company Limited and its subsidiaries
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
101
-
-
-
Total income (expenses) for the year
Dividend paid (Note 26)
Transfer of retained earnings to statutory reserve (Note 24)
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
2,100,694,232
-
-
Net income for the year
17,346,192,920
-
-
Income (expenses) recognised directly in equity
Balance - as at 31 December 2008
-
-
Increase in revaluation deficit on investments
Increase in revaluation surplus on investments
-
2,100,694,232
2,100,694,232
-
Transfer of retained earnings to statutory reserve (Note 24)
-
17,346,192,920
-
Dividend paid (Note 26)
-
-
Balance - as at 1 January 2008
-
Total income for the year
17,346,192,920
-
Net income for the year
-
-
-
1,759,796,584
Balance - as at 31 December 2007
-
Decrease in revaluation deficit on investments
Income recognised directly in equity
-
2,762,632,000
242,692,625
-
-
171,916,871
-
171,916,871
-
171,916,871
70,775,754
70,775,754
-
-
51,998,817
-
51,998,817
-
51,998,817
-
18,776,937
investments
340,897,648
share capital
Share premium
surplus on
14,583,560,920
Revaluation
paid-up
(537,861,364)
-
-
(155,128,811)
-
(155,128,811)
(155,128,811)
-
(382,732,553)
(382,732,553)
-
-
150,344,840
-
150,344,840
150,344,840
-
-
(533,077,393)
investments
deficit on
Revaluation
192,648,978
65,215,999
-
-
-
-
-
-
127,432,979
127,432,979
49,530,131
-
-
-
-
-
-
-
77,902,848
statutory reserve
1,926,002,426
(65,215,999)
(745,886,296)
1,304,319,992
1,304,319,992
-
-
-
1,432,784,729
1,432,784,729
(49,530,131)
(218,753,413)
990,602,606
990,602,606
-
-
-
-
710,465,667
Unappropriated
Retained earnings Appropriated -
21,270,369,817
-
(745,886,296)
1,321,108,052
1,304,319,992
16,788,060
(155,128,811)
171,916,871
20,695,148,061
20,695,148,061
-
(218,753,413)
1,192,946,263
990,602,606
202,343,657
150,344,840
51,998,817
4,522,428,584
15,198,526,627
Total
(Unit: Baht)
For the years ended 31 December 2008 and 2007
Thanachart Bank Public Company Limited and its subsidiaries
Separate financial statements Issued and
Increase in revaluation surplus on investments
Increase from share capital issuance
Balance - as at 1 January 2007
For the years ended 31 December 2008 and 2007
Statements of changes in shareholders' equity (continued)
Thanachart Bank Public Company Limited and its subsidiaries
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED)
STATEMENTS OF CASH FLOWS Thanachart Bank Public Company Limited and its subsidiaries
Thanachart Bank Public Company Limited and its subsidiaries For the years ended 31 December 2008 and 2007
Statements of cash flows For the years ended 31 December 2008 and 2007
(Unit: Baht)
Consolidated
Separate
financial statements 2008
financial statements
2007
2008
2007
Cash flows from operating activities Net income before corporate income tax
2,486,741,577
1,606,081,403
1,418,240,678
1,031,554,517
-
-
Adjustments to reconcile net income before corporate income tax to net cash provided by (paid from) operating activities Share of income from investments accounted for under equity method
(153,064,461)
(79,185,366)
Interest income from operations
(19,444,567,066)
(16,346,406,754)
(18,802,954,135)
(16,081,152,914)
Interest income on investments
(1,029,026,036)
(741,330,285)
(784,140,116)
(664,773,306)
Dividend income
(236,646,290)
(150,166,390)
(341,453,542)
(135,453,042)
Interest expense from operations
7,215,505,273
7,270,777,953
7,237,427,495
7,278,017,293
Interest expense from borrowing
2,175,686,037
2,097,417,250
2,184,580,023
2,080,066,669
537,616,314
350,123,550
436,415,336
305,132,581
3,968,089,390
2,692,496,829
3,547,628,986
2,605,923,708
Depreciation and amortisation Bad debt and doubtful accounts and loss from debt restructuring Amortisation of premiums (discounts) on investment in debt securities Increase in allowance for impairment of investments Increase in allowance for change in value of investments Increase in allowance for impairment of property foreclosed
22,733,675
(250,504,617)
31,921,594
(242,109,142)
242,357,574
35,676,107
97,928,341
35,676,107
-
-
-
58,461,179
64,229,815
57,333,108
(1,575) 68,770,822
Interest income and other income from the assets transferred for debt repayment Loss from disposal of equipment Unrealised loss (gain) on exchange Gain from sales of investment in an associated company
(901,161)
(1,285,960)
(901,161)
(1,285,960)
13,745,764
16,938,200
15,501,581
13,963,520
(63,415,644)
93,176,944
(63,415,644)
93,176,944
-
(6,913,845)
-
-
1,655,114,056
-
-
54,566,116
29,982,394
Increase in unearned premium reserve/life insurance premium reserve Increase in allowance for impairment of other assets
2,486,435,257 49,346,414
33,194,003
Decrease (increase) in other income receivable
106,942,222
(183,430,261)
Decrease in fees and rental received in advance
882,904
(3,066,190)
(33,582,819)
(21,526,095)
(33,582,819)
Amortisation of deferred income
(5,143,846)
(38,835,093)
(5,143,846)
(38,835,093)
Increase in accrued expenses
16,522,812
472,318,316
42,755,467
212,945,681
6,452,351
28,028,979
6,452,351
28,028,979
Amortisation of discounts on borrowings
(21,526,095)
Loss from operating activities before changes in operating assets and liabilities
(1,569,403,416)
(1,409,779,897)
(4,893,060,576)
(3,416,400,241)
(25,562,406,808)
(13,059,053,071)
(24,908,365,594)
(14,841,984,559)
2,500,000,000
3,800,000,000
2,500,000,000
3,800,000,000
-
-
Decrease (increase) in operating assets Interbank and money market items Securities purchased under resale agreements Receivables from clearing house Loans and receivables Property foreclosed Other assets
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
102
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
193,384,774
(14,315,037)
(55,422,256,866)
(27,295,863,657)
(55,467,585,938)
(29,609,287,400)
5,922,657,239
3,787,365,913
5,604,349,821
3,718,764,703
(370,910,969)
(98,968,769)
(450,153,299)
1,827,668
STATEMENTS OF CASH FLOWS Thanachart Bank Public Company Limited and its subsidiaries (CONTINUED) Statements of cash flows (continued)
Thanachart Bank Public Company Limited and its subsidiaries For the years ended 31 December 2008 and 2007
For the years ended 31 December 2008 and 2007 (Unit: Baht)
Consolidated
Separate
financial statements 2008
financial statements
2007
2008
2007
Increase (decrease) in operating liabilities Deposits Interbank and money market items Payable to clearing house
81,503,061,760
(7,861,132,569)
81,745,502,029
3,582,088,750
(1,295,051,260)
3,863,283,572
(7,435,030,637) 276,574,106
294,804,300
(287,742,048)
-
-
Securities business payable
(389,330,350)
158,398,723
-
-
Liability payable on demand
(12,334,058)
(132,595,448)
Other liabilities
(12,334,058)
(132,595,448)
482,218,541
(391,925,657)
231,340,494
(343,598,491)
Cash flows from (used in) operating activities
11,151,572,897
(44,100,662,777)
8,212,976,451
(47,981,730,299)
Cash received from interest from operation
19,391,027,793
16,389,021,874
18,728,689,725
16,141,679,656
Cash paid for interest from operation
(6,822,962,830)
(8,054,821,311)
(6,843,626,805)
(8,061,639,171)
(845,423,002)
(251,805,813)
(263,007,207)
(50,761,412)
Cash paid for corporate income tax Cash received from corporate income tax refundable
101,889,524
Net cash flows from (used in) operating activities
22,976,104,382
(36,018,268,027)
-
19,936,921,688
101,889,524
(39,952,451,226)
-
(8,877,808,522)
3,910,287,328
(6,919,843,145)
6,484,702,549
Cash flows from investing activities Decrease (increase) in investments in securities held for investment Payment to acquire investment in subsidiaries
-
Cash received from sales of investment in an associated company
-
Capital returned from subsidiaries
(4,211,244,839) 345,970,220
(431,140,884)
(4,241,357,378)
-
-
-
-
244,355,148
-
Cash received from interest on investments
996,892,929
747,517,269
762,652,726
712,502,520
Cash received from dividend
237,371,734
151,505,072
342,173,727
136,813,221
Cash received from dividend from an associated company Cash paid for purchase of equipment Cash received from disposal of equipment Net cash flows from (used in) investing activities
81,202,800 (572,898,274) 9,656,408 (8,125,582,925)
(888,090,803) 10,014,070 65,958,317
(489,576,461) 1,846,835 (6,489,532,054)
(816,439,730) 9,155,497 2,285,376,679
Cash flows from financing activities Cash received from issued additional share capital Cash received from borrowings Cash paid for borrowings Cash paid for interest from borrowings Cash paid for dividend Cash paid for dividend to minority interest Net cash flows from (used in) financing activities Net increase in cash
-
4,522,428,584
-
4,522,428,584
5,000,000,000
46,416,811,769
5,000,000,000
46,545,811,769
(16,059,619,944)
(12,297,700,000)
(14,676,119,944)
(10,739,200,000)
(2,276,674,662)
(1,661,551,459)
(2,282,297,174)
(1,634,549,213)
(745,886,296)
(218,753,413)
(745,886,296)
(218,753,413)
(24,992,831)
-
(14,107,173,733)
36,761,235,481
743,347,724
808,925,771
(12,704,303,414) 743,086,220
38,475,737,727 808,663,180
Cash at beginning of the year
3,274,606,674
2,465,680,903
3,274,344,083
2,465,680,903
Cash at end of the year
4,017,954,398
3,274,606,674
4,017,430,303
3,274,344,083
6,154,566,145
4,221,349,520
5,790,320,145
4,148,546,450
Supplemental cash flows information Non-cash transactions Transfer of properties foreclosed from receivables for debt settlement Accounts payable for purchase of fixed assets Bad debt written-off
151,706,930
78,486,737
143,841,708
63,931,354
1,772,468,873
1,207,874,410
1,525,490,095
127,874,410
The accompanying are anan integral partpart of the statements. The accompanyingnotes notes are integral offinancial the financial statements.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
103
Thanachart Bank Public Company Limited and its subsidiaries Notes to CONSOLIDATED consolidated financial NOTES TO
statements For the years ended 31 December 2008 and 2007 FINANCIAL STATEMENTS 1. 1.
General information GENERAL INFORMATION
1.1
The Bank’s information
Thanachart Bank Public Company Limited and its subsidiaries For the years ended 31 December 2008 and 2007
Thanachart Bank Public Company Limited (“the Bank”) was incorporated as a public limited company under Thai laws and its parent company is Thanachart Capital Public Company Limited (herein after referred to as “the Parent Company”), a public limited company also existing under Thai laws. As at 31 December 2008, the Parent Company holds 74.93 percent of the Bank issued shares. The Bank’s registered address is 900, Tonson Tower, Ploenchit Road, Lumpini, Pathumwan, Bangkok and the Bank had 213 operational branches. On 1 October 2007, Extraordinary Shareholders’ Meeting of the Bank approved the delisting of the shares of the Bank from the Stock Exchange of Thailand (“SET”), as volunteered by the Bank. On 15 January 2008, the SET conducted to delist the Bank’s common shares from the SET. On 3 February 2009, the Parent Company sold an additional 416 million shares of the Bank to the Bank of Nova Scotia. As a result, the Bank of Nova Scotia holds 48.998 percent and the Parent Company holds 50.92 percent of the Bank issued shares. All subsidiaries are registered limited or public limited companies under Thai laws and operate their businesses in Thailand. The subsidiaries businesses include securities business, leasing and hire purchase business, non-life insurance business, life insurance business, fund management business, and others. 1.2
Economic crisis The financial crisis experienced by the United States over the current period has had a far reaching adverse effect on the global economy as evidenced by falls in share prices worldwide, a tight squeeze on credit and failures of large financial institutions. The governments of many countries have made continuous efforts to remedy the liquidity crisis, and financial institutions have increased their share capital in order to resolve the problem and to build confidence. However, the global economy remains uncertain. These financial statements have been prepared on the bases of facts currently known to the Bank and its subsidiaries and on estimates and assumptions currently considered appropriate. However, they could be affected by an array of future events.
104
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
1
2. 2.
Basis BASISof OFpreparation PREPARATION
2.1
The financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Profession Act B.E. 2547, with reference to the principles stipulated by the BOT. The presentation of the financial statements has been made in compliance with the Notification of the Bank of Thailand relating to the preparation and format of the financial statements of commercial banks and holding parent company of financial business groups, dated 3 August 2008. The financial statements in Thai language are the official financial statements of the Bank. The financial statements in English language have been translated from such financial statements in Thai language. The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the accounting policy.
2.2
Basis of preparation of the consolidated financial statements a)
These consolidated financial statements include the financial statements of the Bank and the following subsidiaries (“the subsidiaries”): Percentage of holding 2008
2007
Subsidiaries directly held by the Bank
Thanachart Securities Plc.
100.00
100.00
Thanachart Insurance Co., Ltd.
100.00
100.00
Thanachart Life Assurance Co., Ltd.
100.00
100.00
75.00
75.00
Thanachart Broker Co., Ltd.
100.00
100.00
Thanachart Group Leasing Co., Ltd.
100.00
100.00
Thanachart Management and Services Co., Ltd.
100.00
100.00
Thanachart Legal and Appraisal Co., Ltd.
100.00
100.00
Thanachart Training and Development Co., Ltd.
100.00
100.00
T Leasing Co., Ltd. (formerly known as “Thanachart Leasing
100.00
-
Thanachart Fund Management Co., Ltd.
2000 Co., Ltd.”)
Subsidiaries indirectly held by the Bank T Leasing Co., Ltd. National Leasing Co., Ltd.
-
100.00
100.00
100.00
2 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
105
On 30 April 2008, the Bank purchased ordinary shares of T Leasing Company Limited from Thanachart Group Leasing Company Limited, and included T Leasing Company Limited as a subsidiary company in the solo consolidation group. The gain on disposal of investment in such subsidiary company in Thanachart Group Leasing’s financial statements, amounting to Baht 11 million, has been eliminated from the consolidated financial statements. Total assets and total income of the subsidiaries that have significant impact to and are included in the consolidated financial statements as at 31 December 2008 and 2007 and for the years then ended, after eliminating significant intercompany transactions, are as follows: (Unit: Million Baht) Total income for the years Total assets as at 31 December
ended 31 December
2008
2007
2008
2007
Thanachart Life Assurance Co., Ltd.
7,488
6,023
4,968
2,365
Thanachart Group Leasing Co., Ltd.
4,249
5,337
547
284
Thanachart Securities Plc.
3,087
3,637
903
521
Thanachart Insurance Co., Ltd.
2,663
2,422
2,575
1,117
On 12 July 2007, the Bank purchased investments in eight subsidiaries (Thanachart Securities Plc., Thanachart Insurance Co., Ltd., Thanachart Life Assurance Co., Ltd., Thanachart Fund Management Co., Ltd., Thanachart Broker Co., Ltd., Thanachart Group Leasing Co., Ltd., Thanachart Management and Services Co., Ltd. and Thanachart Legal and Appraisal Co., Ltd.) from its parent company. This purchase of subsidiaries was treated as a business combination under common control since the Bank and the eight subsidiaries were all subsidiaries of and controlled by the Parent Company. Therefore, the Bank has been recorded the investments based on a poolingof-interests method, which meant that the Bank recorded both assets and liabilities of all companies at book value at the date of combination under common control. The difference between the business combination cost and the interest of the Bank in the book value of the subsidiaries, amounting to Baht 123 million, was recognised in “Surplus from business combination under common control” and separately presented in shareholders’ equity.
106
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
3
In preparing the consolidated income statement for the year ended 31 December 2007, the Bank did not included the operating results of those subsidiaries from the latest date for which financial statements were presented, but prepared consolidated financial statements only from the date of investment, since no accounting standards have yet been announced. However, to provide additional information for comparison purposes, the pro forma condensed consolidated income statement for the year ended 31 December 2007 have been prepared and presented as though the merger between the Bank and its subsidiaries took place since prior years, as follows: (Unit: Million Baht) For the year ended 31 December 2008
2007
Interest and dividend income
20,688
17,788
Interest expenses
(9,398)
(9,425)
Bad debt and doubtful accounts
(3,955)
(2,744)
Loss on debt restructuring
(13)
Non-interest income Non-interest expenses Corporate income tax Corporate income tax refundable Net income for the year
-
10,700
8,768
(15,536)
(12,278)
(688)
(423)
102
-
1,900
1,686
1,869
1,658
31
28
1.08
0.96
1,735
1,735
Net income attributable to The Bank Minority interests of the subsidiaries
Earnings per share, under business combination (Baht per share) Number of ordinary shares as at year end date (Million shares)
ď€
4 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
107
b)
Subsidiaries are fully consolidated as from the date of acquisition, being the date on which the Bank obtains control.
c)
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent significant accounting policies. In case where there are different accounting policies the Bank has adjusted the effect of these in the consolidated financial statements.
d)
The outstanding balances and significant intercompany transactions between the Bank and its subsidiaries have been eliminated in the consolidated financial statements. The investments in subsidiaries as recorded in the Bank’s and subsidiaries’ books of accounts have been eliminated against shareholders’ equity of the subsidiaries.
e)
Minority interests represent the portion of net income or loss and net assets of the subsidiaries that are not held by the Bank and are presented separately in the consolidated income statements and within equity in the consolidated balance sheet.
2.3
The separate financial statements, which present investments in subsidiaries under the cost method, have been prepared solely for the benefit of the public.
3. 3.
Adoption ofOF new accounting standards ADOPTION NEW ACCOUNTING STANDARDS
3.1
Accounting standards which are effective for the current year The Federation of Accounting Professions has issued Notification No. 9/2550, 38/2550 and 62/2550 mandating the use of new accounting standards as follows. TAS 25 (revised 2007)
Cash Flow Statements
TAS 29 (revised 2007)
Leases
TAS 31 (revised 2007)
Inventories
TAS 33 (revised 2007)
Borrowing Costs
TAS 35 (revised 2007)
Presentation of Financial Statements
TAS 39 (revised 2007)
Accounting Policies, Changes in Accounting Estimates and Errors
TAS 41 (revised 2007)
Interim Financial Reporting
TAS 43 (revised 2007)
Business Combinations
TAS 49 (revised 2007)
Construction Contracts
TAS 51
Intangible Assets
108
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
5
These accounting standards become effective for the financial statements for fiscal years beginning on or after 1 January 2008. The Bank’s management has assessed the effect of TAS 29 and believed that they will not have any significant impact on the current year’s financial statements since it has been applied since 2007. In addition, TAS 31, 33 and 49 are not relevant to the business of the Bank and its subsidiaries, and the remaining of accounting standards will not have any significant impact on the financial statement for the current year. 3.2
Accounting Standards which are not effective for the current year The Federation of Accounting Professions has also issued Notifications No. 86/2551 mandating the use of the following new accounting standards. TAS 36 (revised 2007)
Impairment of assets
TAS 54 (revised 2007)
Non-current Assets Held for Sale and Discontinued Operations
These accounting standards will become effective for the financial statements for fiscal years beginning on or after 1 January 2009. The Bank and its subsidiaries’ management has assessed the effect of these accounting standards and believes that they will not have any significant impact on the financial statements for the year in which they are initially applied for TAS 36. In addition, TAS 54 is not relevant to the business of the Bank and its subsidiaries. 4. SIGNIFICANT Significant accounting policies 4. ACCOUNTING POLICIES 4.1
Revenue recognition a)
Interest and discounts on loans Interest on loan is recognised as income on an accrual basis, based on the amount of principal outstanding. Interest on hire purchase and financial lease is recognised on the effective interest rate. For loans on which principal or interest payments have been defaulted for more than three months past the due date, the Bank and its subsidiaries cease accrual of interest income, and accrued interest already recorded is reversed from the Bank and its subsidiaries’ accounts. Interest is then recognised as income on a cash basis until settlement of such overdue balance has been received from the debtors.
6 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
109
Interest income on restructured loans is recognised as income on an accrual basis, with reference to the interest rate stipulated in the agreements, with the exception of interest on loans that are subject to monitoring for compliance with restructuring conditions, which the Bank and its subsidiaries recognise as income on a cash basis until the receivable is able to comply with the restructuring conditions for a period of no less than three months or three installments, whichever is longer. Interest or discounts already included in the face value of notes receivable or loans are recorded as deferred interest and taken up as income evenly throughout the term of the notes or loans or in proportion of debt repayment. Deferred interest income on hire purchase represents discounted on interest given to debtors by dealers, is recognised based on the effective interest method, in the same manner as interest income recognition on hire purchase receivables. b)
Interest and dividends on investments Interest on investments is recognised as income on an accrual basis based on the effective interest rate. Dividends are recognised as income when the right to receive the dividend is established.
c)
Brokerage fee income Brokerage fee charged on securities trading are recognised as income on the transaction date.
d)
Interest on loans for purchase of securities Interest on loans for purchases of securities is recognised as income over the term of the loans based on the amount of principal outstanding. The subsidiary company ceases accruing interest for certain loans that fall under the conditions set by the Securities Exchange Commission (“SEC�).
e)
Gains (losses) on investments and derivatives Gains
(losses)
on
investments
and
derivatives
are
recognised
as
income/expenses on the transaction dates. f)
Fees and service income Fees and service income are recognised as income on an accrual basis.
ď€ 110
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
7
g)
Insurance/life insurance premium income -
Insurance premium income on insurance policies is recognised on the date the insurance policy comes into effect, after deducting premium ceded and cancelled for insurance policies with coverage periods of up to 1 year. For long-term insurance policies with coverage periods of longer than 1 year, related revenues and expenses are recorded as unearned and prepaid items, and amortised to income and expenses over the coverage period. Insurance premium income is recognised after deducting unearned premium reserve.
-
Life insurance premium income is recognised on the date the insurance policy comes into effect, after deducting premium ceded and refunded.
-
Reinsurance premium income is recognised when the reinsurer places the reinsurance application or statement of accounts.
4.2
Expenses recognition a)
Interest expenses Interest expenses are charged to expenses on an accrual basis. Interest on notes payable included in the face value is recorded as deferred interest and amortised to expenses evenly throughout the term of the notes.
b)
Commission and expenses charged on hire purchase/financial leases For hire purchase/financial lease contracts originating on or after 1 January 2007, initial direct expenses at the inception of a hire purchase/financial lease contract (i.e. commission expenses and stamp duty expenses) are to be deferred and amortised using the effective interest method, with amortisation deducted from interest income throughout the contract period, in order to reflect the effective rate of return on the contracts. Unearned income on hire purchase/financial leases is presented net of commission expenses and initial direct cost on the inception of the contracts.
ď€
8 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
111
4.3
Unearned premium/life insurance premium reserve Unearned premium reserve of a subsidiary company is set aside in compliance with the Notification of the Ministry of Commerce regarding the appropriation of unearned premium reserve as follows: Fire, marine (hull), motors and miscellaneous
-
(except for traveling accident with coverage
Monthly average basis (the one-twenty fourth basis)
of not more than 6 months) Marine and transportation (cargo)
-
Net premium written for the last ninety days
Traveling accident with coverage of not more
-
Net premium written for the last thirty days
than 6 months
Life insurance premium reserve represents the accumulated total reserve for liability up to the balance sheet date, for all life insurance policies in force. The reserve is calculated under the actuarial method prescribed by the Regulation on Life Insurance Policy Reserve as promulgated by the Ministry of Commerce. a)
Reserve for life insurance policies of over 1 year is determined using the fractional reserve method.
b)
Reserve for life insurance policies of 1 year or less is determined based on the full unearned premium reserve and the period of coverage.
4.4
Investments Investments in trading securities are determined at fair value. The Bank and its subsidiaries recognise changes in the value of the securities as income (loss) in the income statements. Investments in available-for-sale securities, both held for short-term and long-term investment, are determined at fair value. The Bank and its subsidiaries recognise changes in the value of the securities as separate items in shareholders’ equity until the securities are sold, when they are then included in determining income. Investments in debt securities, both due within one year and expected to be held to maturity, are recorded at amortised cost. Premiums/discounts on debt securities are amortised by the effective rate method with the amortised amount presented as an adjustment to the interest income.
ď€ 112
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
9
Investments in non-marketable equity securities which are classified as other investments are stated at cost net of allowance for impairment (if any). The Bank and its subsidiaries do not treat investments in mutual fund as being in associated or subsidiary companies because the Bank and its subsidiaries do not have control or influence over the financial and operating policy of these funds, which are independently managed by the fund manager in accordance with the details of each fund project and the funds are under the supervision of the Securities and Exchange Commission. The fair value of marketable securities is based on the latest bid price of the last working day of the year as quoted on the Stock Exchange of Thailand. The fair value of government bonds, state enterprise securities and private sector debt securities is determined using the formula quoted by the BOT, which is based on the yield rate quoted by The Thai Bond Market Association adjusted by an appropriate risk factor. The fair value of unit trusts is determined based on their net asset value. The Bank and its subsidiaries recognised loss on impairment (if any) of available-forsale securities, held-to-maturity debt securities and other investments in the statements of income. The weighted average method is used for computation of the cost of investments. In the event of the Bank and its subsidiaries’ transfer investments to another category, the investments are valued at their fair value prevailing on the transfer date. Differences between the carrying amount of the investments and their fair value on that date are recorded as gains (losses) in determining income or surplus (deficit) from revaluation of investments, which is presented as a separate item in shareholders’ equity and amortised over the remaining period to maturity of the debt securities, depending on the type of investment which is reclassified. 4.5
Investments in subsidiary and associated companies Investments in subsidiaries in the separate financial statements are accounted for under the cost method net of allowance for impairment (if any). Loss on impairment is recognised as expenses in the income statements.
ď€
10 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
113
Investments in associated companies in the consolidated financial statements are accounted for under the equity method. Under this method, investments are initially recorded at acquisition cost and are adjusted to reflect the attributable share of the income from the operations of each associated company, in proportion to the investment. Goodwill, presented as an asset in the consolidated financial statements, is the excess of the purchase price over the net asset value of investment in subsidiaries as of the acquisition date and is stated at cost less allowance for impairment (if any). 4.6
Securities purchased under resale agreements 2008 The Bank enters into agreements with a private company to purchase securities, whereby there is an agreement to resell the securities at certain dates and at a fixed price. Amounts paid for securities purchased are presented as assets under the caption of interbank and money market items or loan, depending on the counter party, and the underlying securities are treated as collateral to such receivables. 2007 The Bank entered into agreements to purchase securities, whereby there is an agreement to resell the securities at certain dates and at a fixed price. Amounts paid for securities purchased subject to resale commitments are presented as assets under the caption of “Securities purchased under resale agreements� in the balance sheets and the underlying securities are treated as collateral to such receivables.
4.7
Receivables from/payable to Clearing House Receivables from/payable to Clearing House comprises the net balance receivable from/payable to Thailand Securities Depository in respect of securities trades settled through the Clearing House of Thailand Securities Depository and the net receivable from/payable to Derivatives Clearing House. These also include amounts pledged with Derivatives Clearing House as security for derivatives trading.
4.8
Loans Loans are stated at the principal balances, excluding accrued interest receivable, except for overdrafts which are presented at the principal balances plus accrued interest receivable. Unrecognised deferred income and discounts on loans are deducted from the loan balances.
ď€ 114
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
11
Hire purchase receivables and financial lease receivables are stated at the contract value of the hire purchase receivables and financial lease receivables net of unearned income, which is presented after netting commission expenses and initial direct cost on the inception of the contracts. Securities and derivatives business receivables comprise the net securities receivable and derivatives business receivables. Securities business receivable comprise the net receivable balances of cash accounts and credit balance accounts (for which the securities purchased are used as collateral) as well as other receivables, such as overdue amounts in cash accounts and securities receivables which are under legal proceedings, are undergoing restructuring, or are being settled in installments. 4.9
Allowances for doubtful accounts a)
The Bank provides allowances for doubtful accounts in accordance with the Notifications of the BOT and adjusts these by the additional amount which is expected not to be collectible based on an evaluation of the current status of the debtors, taking into consideration the recovery risk and the value of collateral. Increase (decrease) in an allowance for doubtful debts is recognised as an expense during the year. The Bank sets provision for normal loans (including restructured receivables) and special mention loans at minimum rates of 1% and 2%, respectively, of the loan balances (excluding accrued interest receivable) net of collateral value, as required by the BOT’s guidelines. Collateral values included vehicles under hire purchase and finance lease contracts. For non-performing loans, provision is set at a rate of 100% of the debt balance remaining after deducting the present value of expected future cash flows from debt collection or from collateral disposal, based on the use of a discount rate and assumptions as to the time needed to dispose of the collateral, in accordance with the BOT’s guideline.
b)
A securities subsidiary has provided an allowance for doubtful accounts based on a review of debtors’ repayment capability, taking into consideration the risk of recovery and the value of collateral. An allowance is set aside for doubtful debts not fully covered by collateral and/or those which may not be fully recovered. Such debt classifications and provisions are made in accordance with the Notifications of the SEC.
12 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
115
c)
Leasing and hire purchase receivables of the subsidiaries have provided allowance for doubtful accounts at a percentage of the amount of principal outstanding net of unearned income, based on the number of months overdue (with reference to the classification of loans under BOT’s guidelines). Allowance for doubtful accounts is set for normal and special mention loans at minimum rates of 1% and 2%, respectively, of the loan balances after deducting collateral, and at 100% of the balance of non-performing loans without deducting collateral.
d)
Allowance for doubtful accounts of other receivables is based on the amount of debt that may not be collectible, determined from a review of the current status of the receivables as at the balance sheet date.
e)
The Bank writes off hire purchase receivables when full allowance for doubtful accounts has been made for such receivables. Other loans are written off when the relevant criteria under tax law are met.
f)
The subsidiary companies write off receivables as bad debts when the relevant criteria under tax law are met.
g)
Amounts written off as bad debts or bad debt recovery are deducted from or added to the allowance for doubtful accounts.
4.10 Troubled debt restructuring In cases where the debt restructuring involves modifications of the terms, the fair value of the receivables after restructuring is based on the net present value of expected future cash flows, discounted by the market’s minimum interest rate for credit to large customers as at the date of the debt restructuring. The differences between the fair values of receivables as of the restructuring date and their previous book values is recorded in “Revaluation allowance for debt restructuring”, and recognised as an expense in the income statements in the restructuring period. The Bank and its subsidiaries review such revaluation allowance based on the net present value of future cash flows over the remaining period to maturity, recognising adjustments against bad debt and doubtful accounts.
116
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
13
In cases where the troubled debt restructuring involves the transfer of assets or equity, the Bank and its subsidiaries record the assets or equity interest received as a result of debt restructuring at their fair value (based on the value appraised by internal appraisers or external independent appraisers) providing this does not exceed the amount of principal legally claimable from the debtor (including interest of which recognition has ceased until the restructuring date). Any excess of the fair value of the assets over the book value is recognised as interest income in the income statements. If assets are transferred under conditions whereby the debtor must repurchase or has the option to repurchase the assets at prices and within a period specified in the agreement, the Bank and its subsidiaries record the assets at the lower of the fair value or book value. Losses arising from debt restructuring through waivers of part of principal or recorded accrued interest receivable are recognised in the income statement when incurred. 4.11 Recognition and amortisation of customers’ assets Assets which customers have placed with the subsidiary company for securities trading, in term of cash accounts and credit balance accounts, including amounts which customers have placed as security for derivative trading are recorded as assets and liabilities of the subsidiary company for internal control purpose, and at the balance sheet date the subsidiary company writes off those amounts which there are no guarantee obligations from both assets and liabilities and presents only those assets which belong to the subsidiary company. 4.12 Property foreclosed Property foreclosed is stated at the lower of cost (fair value with reference to appraisal value less estimated selling expenses, providing this does not exceed the legally claimable amount of debt) or net realisable value, which is determined with reference to the latest appraisal value less estimated selling expenses. Gains on disposal of property foreclosed are recognised in the income statements on disposal date, unless the purchase is made with a loan from the Bank. In such cases, gains are recognised in accordance with the BOT’s guideline. Losses on disposal and impairment are recognised as expenses in the income statement.
ď€
14 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
117
4.13 Land, premises and equipment and depreciation a)
Land and assets in progress are stated at cost and depreciation is not provided.
b)
Premises and equipment are stated at cost less accumulated depreciation and allowance for impairment (if any). Depreciation is calculated with reference to cost on a straight-line basis over the following estimated useful lives: Buildings
-
20
years
Buildings improvement
-
5 - 10 years
Furniture, fixtures and equipment
-
5 - 10 years
Motor vehicles
-
5
years
Depreciation is included in determining income. 4.14 Intangible assets – software and amortisation Intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The Bank and its subsidiaries amortised intangible assets with finite lives on a systematic basis over the economic useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method of such intangible assets are reviewed at least at each financial year end. The amortisation expense is charged to the income statement. The intangible assets with finite useful lives have useful lives of approximately 5 - 10 years. 4.15 Long-term leases Leases that transfer substantially all the risks and rewards of ownership to the Bank and its subsidiaries are classified as financial leases. Financial leases are capitalised at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The outstanding rental obligations, net of finance charges, are included in other payables, while the interest element is charged to the income statements over the lease period. Assets acquired under finance leases are depreciated over their estimated useful lives.
ď€ 118
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
15
Lease not transferring a significant portion of the risks and rewards of ownership to the lessee are classified as operating leases. The Bank and its subsidiaries record advance payments made under operating leases as leasehold rights, and amortise them as expenses in the income statement over the term of the leases on the straight - line basis. 4.16 Premium due and uncollected and allowance for doubtful accounts Premium due and uncollected is carried at its net realisable value. Subsidiary companies provide an allowance for doubtful accounts based on the estimated loss that may be incurred in the collection of the premium due, on the basis of collection experience and a review of current status of the premium due as at the balance sheet date. 4.17 Sales of commercial paper The Bank recorded commercial paper with an aval by the Bank, or without an aval or acceptance which is sold with recourse, as a liability under the caption of “Liabilities under commercial paper sold”. Commercial paper sold at a discount with recourse, which is avaled by or has acceptance from a commercial bank or other finance company, is recorded by crediting the notes receivable account, and the obligations disclosed as part of “Contingent liabilities”. 4.18 Loss reserve and outstanding claims/Benefits payment to life policy Outstanding claims have been provided for upon the receipt of claims advices from the insured/life insured. Loss reserve has been provided based on estimates made by independent appraiser or the relevant officers of the subsidiary company on a case by case basis. The estimated value of losses is limited to not more than the sum insured of the related insurance policies. In addition, a subsidiary company engaged in the non-life insurance business, additionally set up provision for losses incurred but not yet reported (IBNR) at the rate of 2.5 percent of net cash inflows from insurance premiums during the previous 12 months. Such reserve is set up in accordance with the Notification of the Ministry of Commerce governing the appropriation of loss reserves of non-life insurance companies. Benefits paid under life policies are provided for upon receipt of the claims advices from the insured or in accordance with the conditions of the policy.
16 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
119
4.19 Related party transactions Related parties comprise enterprises and individuals that control or are controlled by, the Bank and its subsidiaries, whether directly or indirectly, or which are under common control with the Bank and its subsidiaries. They also include associated company, individuals which directly or indirectly own a voting interest in the Bank and its subsidiaries that give them significant influence over the Bank and its subsidiaries, key management personnel, directors and officers with authority in the planning and direction of the Bank’s and its subsidiaries’ operations. 4.20 Impairment of assets The Bank and its subsidiaries assess at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Bank and its subsidiaries realise loss on impairment when the asset’s recoverable amount is less than the book value. An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use Fair value less costs to sell reflects the amount that the Bank and its subsidiaries could obtain at the balance sheet date from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The Bank and its subsidiaries recognise impairment losses in the income statement. The Bank and its subsidiaries assess at each reporting date whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Bank and its subsidiaries estimate the asset’s recoverable amount and the impairment loss recognised in prior periods for assets other than goodwill is reversed. 4.21 Employee benefits Salary, wages, bonuses and contributions to the social security fund and provident fund are recognised as expenses when incurred.
120
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
17
4.22 Foreign currencies Foreign currency transactions are translated into Baht at the exchange rates ruling on the transaction dates. Assets and liabilities in foreign currencies and off-balance sheets transactions, which were outstanding on the balance sheet date, have been translated into Baht at the rates ruling on the balance sheet date. Exchange gains and losses arising from trading or translation of foreign currencies are included in determining income. 4.23 Provisions Provisions are recognised when the Bank and its subsidiaries have a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 4.24 Income tax Income tax is provided in the accounts based on taxable income determined in accordance with tax legislation. 4.25 Financial derivatives The Bank and its subsidiaries have entered into off-balance sheet transactions involving derivative financial instruments in order to manage risk of the Bank and its subsidiaries and in response to customer needs. Forward foreign currency contracts which originated for trading purposes are recorded as off-balance sheet items, and presented at fair value. Gains or losses arising from changes in the fair value of the contracts are recognised in the income statement. Forward foreign currency contracts, interest rate swap contracts and cross currency and interest rate swap contracts which were not originated for trading purposes are recorded as off-balance sheet items, and presented on an accrual basis. Foreign currency components are translated at the year-end exchange rate, in the same manner as the hedged items, with unrealised gains or losses on translation recognised in the income statement. Interest rate components are presented on an accrual basis, in the same manner as the hedged assets or liabilities, with gains or losses recorded to interest income and interest expense over the terms of the contracts. Receivables and payables under cross currency and interest rate swap contracts are presented at the net amount in balance sheet.
ď€
18 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
121
5. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES 5. Significant accounting judgments and estimates The preparation of financial statements in conformity with generally accepted accounting principles at times requires management to make subjective judgments and estimates regarding matters that are inherently uncertain. These judgments and estimates affect reported amounts and disclosures and actual results could differ. The significant accounting judgments and estimates are as follow: 5.1
Assessment of risk and rewards When considering the recognition and derecognition of assets or liabilities, the management is required to use judgment in assessing risk and rewards. Although management uses its best knowledge of current events and actions in making such assessments, actual risks and rewards may ultimately differ.
5.2
Allowance for doubtful accounts for loans Allowance for doubtful accounts for loans is intended to adjust the value of loans for probable credit losses. The management uses the Bank of Thailand’s regulation regarding the provision of allowance for doubtful accounts and judgments to estimate losses on outstanding loans when there is any doubt about the borrower’s capability to repay the principal and/or the interest. The allowances for loan losses are determined through a combination of specific reviews, probability of default, value of collateral and current economic conditions. However, the use of different estimates and assumptions could affect the amounts of allowances for loan losses and adjustments to the allowances may therefore be required in the future.
5.3
Fair value of financial instruments In determining the fair value of financial instruments that are not actively traded and for which quoted market prices are not readily available, the management exercised judgment, using a variety of valuation techniques. The input to the models used is taken from observable markets, and includes consideration of liquidity, correlation and longerterm volatility of financial instruments.
122
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
19
5.4
Allowance for impairment of investments The Bank and its subsidiaries review an impairment of investments when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The management uses judgment to establish reserves for estimated losses on investments based on an evaluation of the current status of each investment transaction.
5.5
Allowance for impairment of property foreclosed The Bank and its subsidiaries assess allowance for impairment of property foreclosed when net realizable value falls below the book value. The management uses judgment to estimate impairment losses, taking into consideration the latest appraisal value, the type and the nature of the assets. However, the use of different estimates and assumptions could affect the amounts of the allowance for impairment and adjustments to the allowances may therefore be required in the future.
5.6
Property, premise and equipment/Depreciation In determining depreciation of premise and equipment, the management is required to make estimates of the useful lives and salvage values of the premise and equipment and to review estimate useful lives and salvage values when there are any changes.ď€
5.7
Finance lease/Operating lease In determining whether a lease is to be classified as an operating lease or finance lease, management is required to use judgment regarding whether significant risk and rewards of ownership of the leased assets have been transferred to the leasee. Leases that transfer substantially all the risks and rewards of ownership to the leasee are classified as financial leases. In the other hand, leases not transferring a significant portion of the risks and rewards of ownership to the leasee are classified as operating lease.ď€
ď€
20 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
123
5.8
Loss sharing from transfer of non-performing loans to TAMC In estimating losses arising from the transfer of non-performing loans to the Thai Asset Management Corporation (TAMC), the Bank uses the latest information received from TAMC and projections of the amounts expected to be received from the debtors or from collateral value. The management uses judgment in developing the assumptions to be used in estimating the percentage of the outstanding balance under the debt restructuring agreement it is expected will be received, or the collateral value. The management considers these assumptions to be appropriate given the currently available information and current situation. However, the use of different estimates and assumptions could affect the loss sharing arising from the transfer of non-performing loans that the Bank has recorded.
5.9
Life insurance premium reserve Life insurance premium reserve is calculated under the actuarial method, based on the current assumptions or on assumptions established at inception of the contract which reflect the best estimate at the time, increased with a margin for risk and adverse deviation. The main assumptions used relate to mortality, morbidity, longevity, investment returns, expenses, lapse and surrender rates and discount rates.ď€
5.10 Loss reserve and outstanding claims Part of loss reserve claims is estimated from claims advices from insured, based on estimates made by independent appraisers or the relevant officers of the subsidiary company, depending on the particular case. The estimated value of losses is derived from actual losses but not more than the sum insured of the related insurance policies. The other part is for losses incurred but not yet reported (IBNR) and is estimated based on statistic at data and historical experience. However, actual results could differ from the estimates. 5.11 Litigation The Bank and its subsidiaries have contingent liabilities as a result of litigation. The management has used judgment to assess of the results of the litigation case, and in case where they believe that there will be no losses, they will provide no contingent liabilities at the balance sheet date. However, actual results could differ from the estimates.
ď€ 124
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
21
6. AND MONEY MARKET (ASSETS) 6. INTERBANK Interbank and money market items ITEMS (assets) (Unit: Million Baht) Consolidated financial statements 2008 At call
2007
Term
Total
At call
Term
Total
3,422
35,800
39,222
2,571
-
2,571
Commercial banks
628
4,490
5,118
851
451
1,302
Other banks
112
50
162
92
200
292
18
300
318
42
92
134
4,180
40,640
44,820
3,556
743
4,299
Add: Accrued interest receivables
1
40
41
-
18
18
Less: Allowance for doubtful accounts
-
(26)
(26)
Domestic Bank of Thailand and Financial Institutions Development Fund
Other financial institutions Total
Total domestic items
(42)
-
(42)
4,181
40,654
44,835
3,514
761
4,275
286
20,236
20,522
34
35,447
35,481
98
-
98
73
-
73
Others
112
-
112
74
-
74
Total
496
20,236
20,732
181
35,447
35,628
Add: Accrued interest receivables
-
136
136
-
157
157
Less: Allowance for doubtful accounts
-
-
-
-
496
20,372
20,868
181
35,601
35,782
4,677
61,026
65,703
3,695
36,362
40,057
Foreign US Dollar Euro
Total foreign items Total
ď€
(3)
(3)
22 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
125
(Unit: Million Baht) Separate financial statements 2008 At call
2007
Term
Total
At call
Term
Total
3,422
35,800
39,222
2,570
-
2,570
Commercial banks
251
3,200
3,451
238
1
239
Other banks
103
-
103
78
-
78
18
-
18
-
-
-
3,794
39,000
42,794
2,886
1
2,887
-
29
29
-
-
-
3,794
39,029
42,823
2,886
1
2,887
Domestic Bank of Thailand and Financial Institutions Development Fund
Other financial institutions Total Add: Accrued interest receivables Total domestic items Foreign US Dollar
286
20,236
20,522
34
35,447
35,481
98
-
98
73
-
73
Others
112
-
112
74
-
74
Total
496
20,236
20,732
181
35,447
35,628
Add: Accrued interest receivables
-
136
136
-
157
157
Less: Allowance for doubtful accounts
-
-
-
-
496
20,372
20,868
181
35,601
35,782
4,290
59,401
63,691
3,067
35,602
38,669
Euro
Total foreign items Total
(3)
(3)
As at 31 December 2008, deposits of Baht 300 million of a subsidiary are deposited with a financial institution that is in the process of proposing a restructuring of its debts, plans to increase share capital and plans to enter into a rehabilitation process. The subsidiary has set aside partial allowance for doubtful accounts of Baht 25 million for this amount. In addition, as at 31 December 2008, foreign currency deposits of Baht 20,098 million have been covered by forward exchange contracts, as presented in Note 36.1 to the financial statements (2007: Baht 33,140 million).
126
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
23
7. SECURITIES Securities purchased under resaleRESALE agreements PURCHASED UNDER AGREEMENTS As at 31 December 2007, total amount of securities purchased under resale agreements were investments in Government and the Bank of Thailand bonds. 8. INVESTMENTS Investments 8. 8.1
Classified by type of investment (Unit: Million Baht) Separate financial statements
Consolidated financial statements 2008
2007
Cost/
2008
Cost/
2007
Cost/
Cost/
Amortised
Fair
Amortised
Fair
Amortised
Fair
Amortised
Fair
cost
value
cost
value
cost
value
cost
value
Current investment Available-for-sale securities Government and state enterprises securities Private debt securities
4,264
4,290
2,881
2,881
1,956
1,977
100
101
463
469
133
134
420
427
32
32
49
49
10
10
-
-
-
-
4,776
4,808
3,024
3,025
2,376
2,404
132
133
Domestic marketable equity securities Total Add: Allowance for change in value
32
1
28
1
4,808
3,025
2,404
133
1,495
345
1,348
215
Private debt securities
101
76
-
-
Foreign debt securities
524
675
524
675
2,120
1,096
1,872
890
Net Held-to-maturity debt securities - dued within one year Government and state enterprises securities
Total Other investment Investments in property fund
-
65
-
65
Total
-
65
-
65
4,186
4,276
1,088
Total current investment - net
6,928
ď€
24 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
127
(Unit: Million Baht) Separate financial statements
Consolidated financial statements 2008
2007
Cost/
2008
Cost/
2007
Cost/
Cost/
Amortised
Fair
Amortised
Fair
Amortised
Fair
Amortised
Fair
cost
value
cost
value
cost
value
cost
value
Long-term investment Available-for-sale securities Government and state enterprises securities Private debt securities
618
697
486
478
614
693
483
474
4,618
4,800
1,677
1,680
2,714
2,838
1,272
1,275
2,380
1,194
1,104
1,114
575
253
413
407
605
574
1,326
1,376
416
376
836
877
8,221
7,265
4,593
4,648
4,319
4,160
3,004
3,033
Domestic marketable equity securities Listed securities Unit trusts Total Add (less): Allowance for change in value
(722)
55
(61)
29
(234)
-
(98)
-
7,265
4,648
4,160
3,033
9,656
10,851
8,684
9,989
Private debt securities
791
786
-
-
Foreign debt securities
4,323
675
4,323
675
14,770
12,312
13,007
10,664
Less: Allowance for impairment Net Held-to-maturity debt securities Government and state enterprises securities
Total Less: Allowance for impairment Net
(89)
(89)
(89)
(89)
14,681
12,223
12,918
10,575
658
884
655
880
Investment in equity securities
99
100
99
100
Unit trusts
28
28
18
19
Total
785
1,012
772
999
Less: Allowance for impairment
(30)
(22)
(22)
(22)
Net
755
990
750
977
22,701
17,861
17,828
14,585
Other investment Investments in property fund Domestic non-marketable equity securities
Total long-term investment - net
128
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
25
8.2
Classified by due date of debt securities (Unit: Million Baht) Consolidated financial statements 2008
2007
Due within
Due within
Less
Less
than
1-5
Over
than
1-5
Over
1 year
years
5 years
Total
1 year
years
5 years
4,264
42
576
4,882
2,881
13
473
3,367
463
4,318
300
5,081
133
1,677
-
1,810
4,727
4,360
876
9,963
3,014
1,690
473
5,177
32
162
99
293
1
3
4,759
4,522
975
10,256
3,015
1,693
465
5,173
1,495
9,452
204
11,151
345
8,906
1,945
11,196
Private debt securities
101
272
519
892
76
167
619
862
Foreign debt securities
524
4,323
-
4,847
675
675
-
1,350
2,120
14,047
723
16,890
1,096
9,748
2,564
13,408
Total
Available-for-sale securities Government and state enterprises securities Private debt securities Total Add (less): Allowance for change in value Net
(8)
(4)
Held-to-maturity debt securities Government and state enterprises securities
Total Less: Allowance for impairment
-
(89)
-
(89)
-
(89)
-
(89)
Net
2,120
13,958
723
16,801
1,096
9,659
2,564
13,319
Total debt securities
6,879
18,480
1,698
27,057
4,111
11,352
3,029
18,492
ď€
26 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
129
(Unit: Million Baht) Separate financial statements 2008
2007
Due within
Due within
Less
Less
than
1-5
Over
1 year
years
5 years
Total
than
1-5
Over
1 year
years
5 years
Total
Available-for-sale securities Government and state enterprises securities
1,956
39
575
2,570
100
10
473
583
420
2,714
-
3,134
32
1,272
-
1,304
2,376
2,753
575
5,704
132
1,282
473
1,887
28
126
77
231
1
3
(9)
(5)
2,404
2,879
652
5,935
133
1,285
464
1,882
1,348
8,684
-
10,032
215
8,365
1,624
10,204
524
4,323
-
4,847
675
675
-
1,350
1,872
13,007
-
14,879
890
9,040
1,624
11,554
-
(89)
-
(89)
-
(89)
-
(89)
Net
1,872
12,918
-
14,790
890
8,951
1,624
11,465
Total debt securities
4,276
15,797
652
20,725
1,023
10,236
2,088
13,347
Private debt securities Total Add (less): Allowance for change in value Net Held-to-maturity debt securities Government and state enterprises securities Foreign debt securities Total Less: Allowance for impairment
8.3
As at 31 December 2008, the Bank and its subsidiaries have a revaluation surplus and deficit arising from transfers of investments in debt securities, of which the current balances of Baht 1 million and Baht 259 million, respectively, in the consolidated financial statements, and Baht 1 million and Baht 263 million, respectively, in the separate financial statements. These are presented in shareholders’ equity caption. (2007: Baht 5 million and Baht 355 million, respectively, in the consolidated financial statements, and Baht 5 million and Baht 347 million, respectively, in the separate financial statements).
130
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
27
8.4
As at 31 December 2008, long-term investments in held-to-maturity debt securities include non-transferable promissory notes, with terms of 10 years counting from 16 September 2002 and 14 March 2003, amounting to Baht 292 million and Baht 4 million, respectively, which were received as a result of the transfer of non-performing loans of totaled Baht
296 million to Thai Asset Management Corporation (“TAMC”)
(2007: Baht 296 million). However, the agreed transfer price received in the form of promissory notes could still be revised up or down after TAMC reviews the price or has the collateral assessed or the price adjusted. As at 31 December 2008, the Bank is still unable to estimate the exact amount of such losses. However, the Bank has estimated its share of contingent losses arising from the management of non-performing assets at approximately Baht 89 million (2007: Baht 89 million). Such amount has been presented as allowance for impairment under the caption of investments in held-to-maturity debt securities, classified based on the type of promissory note. In addition, the Bank also share joint responsibility with TAMC for future profits or losses arising from TAMC’s management of the non-performing assets as mentioned in Note 36.2 to the financial statements. 8.5
As at 31 December 2008, investments in government and state enterprise bonds in the consolidated financial statements of Baht 1,257 million (at amortised cost) have been placed as collateral for loans from commercial banks and as security with the Insurance Registrar (2007: Baht 949 million).
8.6
As at 31 December 2008, all foreign debt securities of the Bank, amounting to Baht 4,847 million, have been hedged through cross currency interest rate swap contracts, and investments in private debt securities of the Bank amounting to Baht 500 million and of its subsidiaries amounting to Baht 300 million have been hedged through interest rate swap contracts. All of these contracts are presented in Note 36.1 to the financial statements (2007: investments in foreign debt securities amounting to Baht 1,350 million have been hedged through a cross currency interest rate swap contracts).
28 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
131
8.7
As at 31 December 2008 and 2007, investments in which the Bank and its subsidiaries hold not less than 10 percent of the equity of the investee are as follows: Consolidated financial statements 2008 Nature of Securities
business
Separate financial statements
2007
Percentage
2008
Percentage
Cost
of holding
Cost
of holding
Million Baht
Percent
Million Baht
Percent
2007
Percentage Cost
of holding
Million Baht
Percentage Cost
Percent
of holding
Million Baht
Percent
Public utilities and services Puen Pob Paet Co., Ltd.
Medical Clinic
-
10.00
-
10.00
-
10.00
-
10.00
Mutual Fund -
340
26.67
423
26.67
340
26.67
423
26.67
156
56.00
196
56.00
156
56.00
196
56.00
-
-
184
20.00
-
-
184
20.00
267
28.99
268
29.14
267
28.99
268
29.14
-
-
200
21.94
-
-
200
21.94
40
5.09
31
23.55
-
-
-
-
-
-
130
14.81
-
-
-
-
-
-
52
15.93
-
-
17
5.31
-
-
134
10.40
-
-
38
2.97
-
-
114
18.96
-
-ď€
57
9.48
Others The Thai Business Fund 3 (1)
property Sub Thawee Property Fund
(1)
Mutual Fund property
Thai Pattana Fund 1
(1)
Mutual Fund property
Thanasarn Open-End Fund (1)
Mutual Fund - debt securities
Thanachart Tuntawee 1
(1)
Mutual Fund - equity and debt securities
Thi Ra Sombat Open-End Fund (1) The Krung Thai Dividend Fixed-Income Fund 1 A.M. Global Emerging Market Equity Fund
Mutual Fund - debt securities Mutual Fund - debt securities Mutual Fund - foreign equity securities
Thanachart VALUexU.S. Fund Mutual Fund - foreign equity securities Thanachart Premium Brands Fund
(1)
Mutual Fund - foreign equity securities
The Bank and its subsidiaries do not treat these investments as associated or subsidiary companies because the Bank and its subsidiaries do not have control or influence over the financial and operating policy of these funds, which are independently managed by the fund manager in accordance with the details of each fund project and the funds are under the regulations of the Committees of the Stock Exchange of Thailand. Therefore, the Bank and its subsidiaries account for its long-term investments in these funds as available-for-sale securities or other investments depending on the objective of investment.
ď€ 132
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
29
8.8
As at 31 December 2008 and 2007, investments in securities of the Bank and its subsidiaries included investments in the companies with weak financial position and poor operating results, are summarised below.
Consolidated financial statements Allowance for changes in value/impairment Number of investment 2008
Cost
2007
Fair value
provided in the accounts
2008
2007
2008
2007
2008
2007
Million
Million
Million
Million
Million
Million
Baht
Baht
Baht
Baht
Baht
Baht
Equity securities - common shares 1. Companies whose auditors’ reports cited going concern issues
2
2
21
21
1
1
20
20
1
-
8
-
-
-
8
-
2. Financial institutions that are in the process of proposing plans in order to enter the rehabilitation process
Separate financial statements Allowance for changes in value/impairment Number of investment 2008
Cost
2007
Fair value
provided in the accounts
2008
2007
2008
2007
2008
2007
Million
Million
Million
Million
Million
Million
Baht
Baht
Baht
Baht
Baht
Baht
21
21
1
1
20
20
Equity securities - common shares 1. Companies whose auditors’ reports cited going concern issues
2
2
30 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
133
9. 9.
Investments in IN subsidiary companies INVESTMENTS SUBSIDIARY COMPANIES
9.1
As at 31 December 2008 and 2007, investments in subsidiary companies in the separate financial statements stated under the cost method, consist of investment in ordinary shares of the following subsidiary companies: (Unit: Million Baht) Separate financial statements Paid-up share Nature of Company’s name
Thanachart Securities Plc.
capital
Percentage
Value of investment
Dividend income for
of holding
under the cost method
the years then ended
business
2008
2007
2008
2007
2008
2007
Securities
1,500
1,500
100
100
2008
1,858
2,028
240
740
500
100
Life - insurance
500
500
Fund
100
2007 -
100
867
627
-
-
100
100
936
936
50
-
100
75
75
97
122
75
-
100
100
100
100
104
141
69
-
360
360
100
100
400
412
15
-
Services
6
6
100
100
11
11
-
-
Legal services
10
10
100
100
13
13
-
-
Training services
5
5
100
100
5
5
14
-
180
-
100
-
business Thanachart Insurance Co., Ltd. Thanachart Life Assurance
Non-life insurance
Co., Ltd. Thanachart Fund Management Co., Ltd.
management
Thanachart Broker Co., Ltd.
Non-life insurance broker
Thanachart Group Leasing
Hire purchase
Co., Ltd. Thanachart Management and Services Co., Ltd. Thanachart Legal and Appraisal Co., Ltd. Thanachart Training and Development Co., Ltd. T Leasing Co., Ltd.
Hire purchase
Total investments in subsidiary companies
9.2
191
-
-
-
4,482
4,295
463
-
The consolidated balance sheet as at 31 December 2008 and consolidated income statement for the year then ended included assets of Baht 7,488 million, income of Baht 4,968 million and net income of Baht 504 million of Thanachart Life Assurance Co., Ltd. (“subsidiary company”) (2007: total assets of Baht 6,023 million, income of Baht 2,365 million and net income of Baht 109 million). The auditor of the subsidiary company issued a qualified report on the financial statements of that company for the year ended 31 December 2007 with respect to the effect of any adjustments which might be required as a result of a scope limitation imposed on the audit of insurance income and related expenses. Such issue has continued to have an effect in the current year. However, the Bank’s management believes that there is no material impact to the Bank’s consolidated financial statements.
134
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
31
10. INVESTMENTS Investments inIN anAN associated company 10. ASSOCIATED COMPANY 10.1 As at 31 December 2008 and 2007, investments in an associated company in the consolidated financial statements included investment in MBK Plc., which engaged in property rental, hotel and services businesses, can be summarised as follows: (Unit: Million Baht)
Company’s name
Share of income
for the years
for the years
then ended
then ended
Paid-up
Percentage
share capital
of holding (%)
2008
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
10.76
10.76
1,066
1,066
1,083
1,125
81
41
153
79
1,066
1,066
1,083
1,125
81
41
153
79
2007
Investment value
Dividend income
Cost method
Equity method
Consolidated financial statements MBK Plc.
1,886
1,886
The Bank and its subsidiaries classified such investments as investments in associated company, like its Parent Company, since the Parent Company had significant influence in that company. 10.2 Summarised financial information of an associated company as at 30 September 2008 and 2007 and for the years then ended as follows: (Unit: Million Baht) Paid-up share capital 30
30
Total assets 30
Total liabilities
30
30
Total income for the
30
September September September September September September Company’s name MBK Plc.
Net income for the
years ended
years ended
30 September
30 September
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
1,886
1,886
22,846
19,027
12,173
8,951
6,410
5,868
1,425
1,408
The share of income of that associated company recognised in the current year is determined based on financial statements of that associated company prepared for a different period, as a result of limitations on the availability of information. The financial information used was based on the balance sheets as of 30 September 2008, and income statement for the year then ended, prepared by the Bank’s management, with reference to the financial statements as reviewed by its auditor and adjusted to reflect differences in accounting policies. The Bank’s management believes that the net income for the year ended 30 September 2008 is not materially different from that income for the year ended 31 December 2008 (2007: balance sheet as of 30 September 2007 and income statement for the period as from such company was associated company until 30 September 2007). 10.3 Fair value of investment in an associated company which is listed in the Stock Exchange of Thailand as at 31 December 2008 was Baht 1,005 million. 32
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
135
11. Loans interest receivables 11. LOANSand ANDaccrued ACCRUED INTEREST RECEIVABLES 11.1 Classified by loan type (Unit: Million Baht) Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
2,511
1,468
2,511
1,468
Loans
39,992
30,648
39,990
30,646
Notes receivable
25,805
25,319
30,273
29,613
203,829
167,956
198,344
162,205
1,897
1,252
1,807
1,008
274,034
226,643
272,925
224,940
288
208
303
209
Loans Overdrafts
Hire purchases receivables Financial leases receivables Total loans Add: Accrued interest receivables Less: Allowance for doubtful accounts
(6,769)
(4,731)
(6,365)
(4,522)
(20)
(10)
(20)
(10)
Revaluation allowance for debt restructuring Loans and accrued interest receivables - net
267,533
222,110
266,843
220,617
1,095
974
-
-
Credit balances receivables
598
852
-
-
Other receivables
415
307
-
-
2,108
2,133
-
-
-
1
-
-
-
-
Securities business receivables Customers’ accounts
Total securities business receivables Add: Accrued interest receivables Less: Allowance for doubtful accounts
(298)
(306)
Securities business receivables and accrued interest receivables - net Loans and accrued interest receivables - net
1,810
1,828
-
-
269,343
223,938
266,843
220,617
ď€ 136
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
33
11.2 Classified by remaining period of contract (Unit: Million Baht) Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
At call*
13,867
20,842
17,302
23,934
Not over 1 year
23,640
12,799
22,116
11,528
238,923
195,344
233,810
189,687
276,430
228,985
273,228
225,149
Over 1 year Total loans and accrued interest receivables * Included expired contracts
11.3 Classified by currency and country (Unit: Million Baht) Consolidated financial statements 2008
Baht US Dollar Other currencies Total
2007
Domestic
Foreign
Total
Domestic
Foreign
275,151
Total
256
275,407
228,256
330
228,586
955
-
955
399
-
399
68
-
68
-
-
-
276,174
256
276,430
228,655
330
228,985
(Unit: Million Baht) Separated financial statements 2008
Baht US Dollar Other currencies Total
2007
Domestic
Foreign
Total
Domestic
Foreign
271,949
256
272,205
224,420
330
224,750
955
-
955
399
-
399
68
-
68
-
-
-
272,972
256
273,228
224,819
330
225,149
ď€
Total
34 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
137
11.4 Classified by type of business and loan classification (Unit: Million Baht) Consolidated financial statements 2008 Special
Doubtful
Normal
mention
Substandard
Doubtful
of loss
Total
Parent and related companies
8,560
-
-
-
-
8,560
Agricultural and mining
1,143
-
-
10
-
1,153
Manufacturing and commerce
11,273
647
14
372
523
12,829
Real estate and construction
13,369
430
219
25
612
14,655
Public utilities and services
11,666
1,240
71
14
56
13,047
Housing loans
6,430
545
67
110
241
7,393
Securities
1,595
-
4
295
-
1,894
177,765
21,941
1,057
894
2,172
203,829
6,508
709
249
282
605
8,353
4,707
9
-
-
1
4,717
243,016
25,521
1,681
2,002
4,210
276,430
Personal consuming
Hire purchase Others Others Total loans and accrued interest receivables
(Unit: Million Baht) Consolidated financial statements 2007 Special
Doubtful
Normal
mention
17,616
-
-
-
-
17,616
Agricultural and mining
1,268
6
-
-
-
1,274
Manufacturing and commerce
6,231
98
23
459
243
7,054
Real estate and construction
5,223
77
3
257
603
6,163
Public utilities and services
7,205
110
147
1
58
7,521
Housing loans
6,851
524
98
113
156
7,742
Securities
1,612
-
8
-
300
1,920
146,944
18,525
875
554
1,058
167,956
6,811
675
256
264
266
8,272
3,396
70
-
-
1
3,467
203,157
20,085
1,410
1,648
2,685
228,985
Parent and related companies
Substandard
Doubtful
of loss
Total
Personal consuming
Hire purchase Others Others Total loans and accrued interest receivables
ď€ 138
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
35
(Unit: Million Baht) Separate financial statements 2008 Special Normal
Doubtful
mention
Substandard
Doubtful
of loss
Total
Parent, subsidiaries and related companies
12,815
-
-
-
-
12,815
Agricultural and mining
1,143
-
-
9
-
1,152
Manufacturing and commerce
11,263
647
14
372
523
12,819
Real estate and construction
13,339
430
219
25
612
14,625
Public utilities and services
11,633
1,241
71
14
56
13,015
Housing loans
6,430
545
67
110
241
7,393
Hire purchase
173,967
20,642
927
817
1,991
198,344
6,505
709
249
282
605
8,350
4,706
8
-
-
1
4,715
1,629
4,029
273,228
Personal consuming
Others Others
Total loans and accrued interest receivables
241,801
24,222
1,547
(Unit: Million Baht) Separate financial statements 2007 Special Normal
Doubtful
mention
Substandard
Doubtful
of loss
Total
Parent, subsidiaries and related companies
21,668
-
-
-
-
21,668
Agricultural and mining
1,268
6
-
-
-
1,274
Manufacturing and commerce
6,210
98
23
459
243
7,033
Real estate and construction
5,211
41
3
257
603
6,115
Public utilities and services
7,061
110
147
1
58
7,377
Housing loans
6,851
524
98
113
156
7,742
Hire purchase
142,393
17,511
772
520
1,009
162,205
6,811
675
256
264
266
8,272
3,393
70
-
-
-
3,463
200,866
19,035
1,299
1,614
2,335
225,149
Personal consuming
Others Others Total loans and accrued interest receivables
36 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
139
11.5 Non-performing loans As at 31 December 2008 and 2007, the Bank and the securities company, a subsidiary, had non-performing loans (debtors classified as substandard, doubtful and doubtful of loss) classified in accordance with the Notification of the BOT and SEC as follows: (Unit: Million Baht) Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
7,167
5,213
7,167
5,213
299
307
-
-
Non-performing loans (excluding accrued interest receivables) The Bank Securities business
The above definition of non-performing loans does not include overdue loans which have been restructured and meet the conditions for classification as Normal or Special Mention debt under BOT’s regulations. Additionally, the Bank and the subsidiary company, securities company, had loans for which income recognition under an accrual basis has been discontinued, as follows: (Unit: Million Baht)
The Bank Securities business
Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
7,251
4,927
7,251
4,927
299
307
-
-
ď€ 140
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
37
11.6 Unearned income/interest income received in advance As at 31 December 2008 and 2007, the Bank and its subsidiaries had unearned interest income and interest income received in advance as follows: (Unit: Million Baht)
Unearned interest income
Consolidated
Separate
financial statements
financial statements
2008
2007
2008
175
175
175
175
31,095
27,274
29,872
25,983
5
2
5
2
2007
Unearned income from hire purchase/ financial lease Interest income received in advance
11.7 Hire purchases/Financial leases receivables As at 31 December 2008, the Bank and its subsidiaries had hire purchase/financial lease receivables - net amounting to Baht 201,300 million in the consolidated financial statements and Baht 195,823 million in the separate financial statements and these mostly comprise hire purchase agreements/financial lease contracts for cars and motorcycles. The terms of the agreements are generally between 3 and 6 years and most carry interest at fixed rates. (Unit: Million Baht) Consolidated financial statements as at 31 December 2008 Amounts due under lease agreements Less than
Gross investment in the lease Unearned finance income
1 year*
1 – 5 years
76,238
155,435
(13,436)
(17,480)
62,802
137,955
Over 5 years 5,148 (179)
Total 236,821 (31,095)
Present value of minimum lease payments receivable Allowance for doubtful accounts
4,969
205,726 4,761
* Included non-performing receivables
ď€
38 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
141
(Unit: Million Baht) Consolidated financial statements as at 31 December 2007 Amounts due under lease agreements Less than
Gross investment in the lease Unearned finance income
1 year*
1 – 5 years
58,984
133,553
(11,439)
(15,702)
47,545
117,851
Over 5 years 3,945
Total 196,482
(133)
(27,274)
Present value of minimum lease payments receivable
3,812
169,208
Allowance for doubtful accounts
2,954
* Included non-performing receivables (Unit: Million Baht) Separate financial statements as at 31 December 2008 Amounts due under lease agreements Less than
Gross investment in the lease Unearned finance income
1 year*
1 – 5 years
73,318
151,912
(12,794)
(16,922)
60,524
134,990
Over 5 years 4,793
Total 230,023
(156)
(29,872)
Present value of minimum lease payments receivable
4,637
200,151
Allowance for doubtful accounts
4,328
* Included non-performing receivables (Unit: Million Baht) Separate financial statements as at 31 December 2007 Amounts due under lease agreements Less than
Gross investment in the lease Unearned finance income
1 year*
1 – 5 years
56,126
129,355
(10,797)
(15,070)
45,329
114,285
Over 5 years 3,715 (116)
Total 189,196 (25,983)
Present value of minimum lease payments receivable Allowance for doubtful accounts
3,599
163,213 2,717
* Included non-performing receivables
142
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
39
11.8 Troubled debt restructuring During the year 2008, the Bank and its subsidiaries have entered into debt restructuring agreements as follows:
Number of Type of restructuring
Outstanding
loan balance
loan balance
Type of assets
assets to be
before
after
to be
transferred per
transferred
agreements
restructuring
debtors
Fair value of
Outstanding
(1)
restructuring
Million Baht
Million Baht
221
814
810
3
6
6
224
820
816
211
615
615
3
6
6
214
621
621
(1)
Million Baht
Consolidated financial statements Modification of repayment conditions Transfer of assets and/or
Land
7
Land
7
ordinary shares and/or modification of repayment conditions Total Separate financial statements Modification of repayment conditions Transfer of assets and/or ordinary shares and/or modification of repayment conditions Total
(1) Presents the outstanding balance per the books of account (principal plus accrued interest).
Counting from the balance sheet date, the remaining periods to maturity of receivables which entered into debt restructuring agreements during the year 2008, are summarised below. Consolidated financial statements
Separate financial statements
Outstanding loan
Outstanding loan
balances after Periods
Number of debtors
restructuring
balances after Number of debtors
Million Baht Past due after restructuring
restructuring Million Baht
102
493
102
493
Due within 2008
68
102
65
55
Less than 5 years
34
155
27
7
6
25
6
25
5 - 10 years 10 - 15 years
3
3
3
3
Over 15 years
11
38
11
38
224
816
214
621
Total
40 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
143
Supplemental information for the current year relating to restructured loan is as follows: (Unit: Million Baht)
Consolidated
Separated
financial statement
financial statement
Interest income recognised in income statement
144
142
Cash repayment from receivables
751
688
7
7
13
9
Properties foreclosed received for debts settlement Loss on debt restructuring
As at 31 December 2008, the Bank and its subsidiaries have the following restructured receivables balance (principal and accrued interest receivable) as follows: Restructured receivables Total number
Thanachart Bank Plc. Thanachart Securities Plc.
of outstanding
Number of
Outstanding
loans balances,
receivables
receivables
loans balances
net of collateral
Million Baht
Million Baht
707,434
381
2,645
883
1,580
8
134
134
ď€ 144
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Outstanding
41
11.9 As at 31 December 2008 and 2007, the Bank had loans to parent company, subsidiary and related companies within Thanachart Group as follows:
Company’s name
Type of credit
Contract period
Interest rate
as at 31 December 2008
as at 31 December 2008
Outstanding balances 2008
2007
Million Baht
Million Baht
Parent company Thanachart Capital Plc.
Promissory note
Call but not over December
The Bank’s cost of fund
2009
plus a fixed interest rate
4,500
12,500
3,645
4,000
824
294
3,650
4,250
12,619
21,044
per annum Subsidiary companies Thanachart Group Leasing
Promissory note
At call
Money market interest
Co., Ltd.
rate but not less than one-year fixed deposit rate plus a fixed interest rate per annum
T Leasing Co., Ltd.
Promissory note
At call
Money market interest rate but not less than one-year fixed deposit rate plus a fixed interest rate per annum
Related company NFS Asset Management
Promissory note
Call but not over December
The Bank’s cost of fund
2009
plus a fixed interest rate
Co., Ltd.
per annum Total
11.10 Classification of loans under the Bank of Thailand’s guidelines As at 31 December 2008 and 2007, the Bank classified and made allowances against its loans (including loans to financial institutions which presented as part of interbank and money market items) in accordance with the BOT’s guidelines as summarised below. (Unit: Million Baht) Separate financial statements Debt balance/ book value 2008
Debt balance net of
(1)
collateral
2007
(2)
Minimum percentage
2008
2007
(Percent)
Allowance for doubtful accounts 2008
2007
Loans and accrued interest receivables (including interbank and money market items) Normal
280,590
201,017
75,170
62,878
1
752
629
24,186
19,019
8,905
6,149
2
178
123
Substandard
1,547
1,299
1,163
964
100
1,163
964
Doubtful
1,629
1,614
1,156
901
100
1,156
901
Doubtful of loss
4,029
2,335
3,019
1,558
100
3,019
1,558
311,981
225,284
89,413
72,450
6,268
4,175
Special mention
Total
Additional allowance for possible uncollectability debts Total
(1) (2)
97
350
6,365
4,525
Debt balance/book value for normal and special mention loans are excluded accrued interest receivables. Debt balance net of collateral for substandard, doubtful and doubtful of loss loans are debt balance remaining after deducting the present value of expected future cash flows from debt collection or from disposal of collaterals.
42 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
145
11.11 Loan in companies which have settlement problems As at 31 December 2008 and 2007, one part of the Bank and its subsidiaries’ loans in the consolidated financial statements and the separate financial statements included debts due from companies with weak financial position and poor operating results: Consolidated financial statements Allowance for doubtful accounts provided Number of debtors 2008
1. Listed companies vulnerable to
Debt balance
2007
Collateral value
in the accounts
2008
2007
2008
2007
2008
2007
Million
Million
Million
Million
Million
Million
Baht
Baht
Baht
Baht
Baht
Baht
2
2
263
263
57
69
206
194
13
15
858
903
809
1,533
284
269
541
287
1,051
810
865
771
404
230
delisting from the SET 2. Non - listed companies with similar operating results and financial positions to listed companies vulnerable to delisting from the SET 3. Companies which have loan settlement problems or have defaulted on the repayment
Separate financial statements Allowance for doubtful accounts provided Number of debtors 2008
1. Listed companies vulnerable to
Debt balance
2007
Collateral value
in the accounts
2008
2007
2008
2007
2008
2007
Million
Million
Million
Million
Million
Million
Baht
Baht
Baht
Baht
Baht
Baht
2
2
263
263
57
69
206
194
13
15
858
903
809
1,533
284
269
415
287
959
810
746
771
387
230
delisting from the SET 2. Non - listed companies with similar operating results and financial positions to listed companies vulnerable to delisting from the SET 3. Companies which have loan settlement problems or have defaulted on the repayment
ď€ 146
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
43
11.12 Classification of securities business receivables in accordance with the Notification of the Office of the Securities and Exchange Commission As at 31 December 2008 and 2007, a subsidiary company operating in the securities business classified its securities business receivables and accrued interest receivables and provided related allowance for doubtful accounts in accordance with the Notification of the Office of the Securities and Exchange Commission (SEC) as follows: (Unit: Million Baht) Allowance for doubtful Receivable and accrued
Allowance for doubtful
interest receivables
accounts as required by SEC
accounts provided in the accounts
2008
2007
2008
2007
2008
2007
296
301
296
301
296
301
4
7
-
-
2
5
300
308
296
301
298
306
Doubtful Substandard Total
The above substandard receivables were the outstanding debt balance which equal to the pledged securities. 11.13 Hire purchase receivables/financial lease receivables of subsidiaries separate by aging As at 31 December 2008 and 2007, loans in consolidated financial statements which included hire purchase and financial lease receivables of three subsidiary companies engaged in hire purchase and financial lease businesses are classified by the due date of the contracts as follows: (Unit: Million Baht) 2008
2007
5,187
5,808
207
137
Overdue more than 1 year
45
19
Debtors under legal actions
136
31
5,575
5,995
433
237
Current or overdue less than 90 days Overdue 91 - 365 days
Total
Allowance for doubtful accounts provided in the accounts
ď€
44 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
147
12. ALLOWANCE Allowance forFOR doubtful accounts 12. DOUBTFUL ACCOUNTS (Unit: Million Baht) For the year ended 31 December 2008 Separate financial statements Special
Sub-
Doubtful
General
Normal
mention
standard
Doubtful
of loss
provision
Subsidiary
626
123
964
901
1,558
350
4,522
543
(28)
5,037
126
55
199
255
3,158
(253)
3,540
393
(1)
3,932
Total
companies
Eliminations Consolidated
Balance - beginning of the year Increase (decrease) during the period Bad debts recovery
-
-
-
-
Bad debts written-off
-
-
-
-
(1,526)
43
-
-
(1,526)
43
-
-
-
-
(214)
-
(214)
752
178
1,163
1,156
1 (206)
-
44
-
(1,732)
-
(214)
Reversal from disposal of loans Balance - end of the year
3,019
97
6,365
731
(29)
7,067
(Unit: Million Baht) For the year ended 31 December 2007 Separate financial statements
Normal
Special
Sub-
mention
standard
Doubtful
General
Doubtful
of loss
provision
Subsidiary Total
companies
Eliminations Consolidated
Balance - beginning of the year
763
59
518
596
990
136
3,062
-
-
3,062
-
-
-
-
-
-
-
453
-
453
64
446
305
1,772
164
2,614
114
-
-
-
-
50
50
-
Allowance for doubtful accounts of subsidiaries as at the purchase date Increase (decrease) during the year
(137)
(28)
2,700
Reversal from revaluation allowance for debt restructuring
-
Bad debts recovery
-
-
-
-
Bad debts written-off
-
-
-
-
626
123
964
901
Balance - end of the year
148
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
4 (1,208) 1,558
350
4
-
1
-
(1,208)
(25)
-
4,522
543
(28)
50 5 (1,233) 5,037
45
13. REVALUATION Revaluation allowance for debt 13. ALLOWANCE FORrestructuring DEBT RESTRUCTURING (Unit: Million Baht)
Balance - beginning of the year Add:
Increase during the year
Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
10
71
10
71
8
-
8
-
Add (less): Amortised during the year
2
(11)
2
(11)
Transfer to allowance for doubtful accounts
-
(50)
-
(50)
Balance - end of the year
20
10
20
10
14. CLASSIFICATION Classification of assets 14. OF ASSETS As at 31 December 2008 and 2007, the quality of assets classified in accordance with the announcements of the BOT are as follows: (Unit: Million Baht) Separate financial statements Loans and accrued interest receivables 2008 Normal
2007
Property Investments
foreclosed
Other assets
Total
2008
2007
2008
2007
2008
2007
2008
2007
280,590
201017
-
-
-
-
57
69
280,647
201,086
24,186
19,019
-
-
-
-
68
66
24,254
19,085
Substandard
1,547
1,299
-
-
-
-
4
4
1,551
1,303
Doubtful
1,629
1,614
-
-
-
-
6
5
1,635
1,619
Doubtful of loss
4,029
2,335
484
147
155
91
84
30
4,752
2,603
311,981
225,284
484
147
155
91
219
174
312,839
225,696
Special mention
Total
46 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
149
15. PROPERTY Property foreclosed 15. FORECLOSED (Unit: Million Baht) Consolidated financial statements
Separate financial statements
For the year ended 31 December 2008
For the year ended 31 December 2008
Balance -
Balance -
Balance -
Balance -
beginning of
end of
beginning of
end of
the year
the year
the year
Additions
Disposals
Additions
Disposals
the year
Assets transferred in settlement of debts Immovable assets
708
7
(295)
420
708
7
(295)
420
Movable assets
762
6,148
(5,628)
1,282
743
5,783
(5,309)
1,217
Assets foreclosed from purchase by bid on the open market Immovable assets Total property foreclosed Less: Allowance for impairment Property foreclosed - net
46
15
(2)
59
46
15
(2)
59
1,516
6,170
(5,925)
1,761
1,497
5,805
(5,606)
1,696
(92) 1,424
(389) 5,781
320
(161)
(5,605)
1,600
(91)
(378)
1,406
314
5,427
(5,292)
(155) 1,541
16. LAND, Land, premises and equipment 16. PREMISES AND EQUIPMENT (Unit: Million Baht) Consolidated financial statements Buildings and
Land
Assets
Furniture
buildings
and
improvement
fixtures
under Vehicles
installation
Total
Cost 31 December 2007
398
238
2,162 583
Additions
-
18
Transfers/Disposals
-
(15)
31 December 2008
(5)
159
22
2,979
22
97
720
(19)
(24)
(63)
398
241
2,740
162
95
3,636
31 December 2007
-
10
813
69
-
892
Transfer/Disposals
-
(2)
(25)
(16)
-
(43)
Depreciation for the year
-
15
434
27
-
476
31 December 2008
-
23
1,222
80
-
1,325
31 December 2007
398
228
1,349
90
22
2,087
31 December 2008
398
218
1,518
82
95
2,311
Accumulated depreciation
Net book value
Depreciation charge included in the income statements for the years ended 31 December 2007
314
2008
476
150
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
47
(Unit: Million Baht) Separate financial statements
Land
Buildings
Furniture
Assets
and building
and
under
improvement
fixtures
Vehicles
installation
Total
Cost 31 December 2007 Additions Disposals 31 December 2008
398
178
1,676
85
2
2,339
-
3
520
20
90
633
-
-
398
181
2,173
(23)
99
(6)
92
-
2,943
(29)
-
7
515
34
-
556
Accumulated depreciation 31 December 2007 Disposals
-
-
(10)
(5)
-
(15)
Depreciation for the year
-
9
362
16
-
387
31 December 2008
-
16
867
45
-
928
Net book value
31 December 2007
398
171
1,161
51
2
1,783
31 December 2008
398
165
1,306
54
92
2,015
Depreciation charge included in the income statements for the years ended 31 December 2007
273
2008
387
As at 31 December 2008, the Bank and its subsidiaries have vehicles acquired under financial leases with net book values amounting to approximately Baht 78 million. In addition, the Bank and its subsidiaries have office equipment and vehicles which have been fully depreciated but are still in use with original costs, before deducting accumulated depreciation, amounting to approximately Baht 274 million (separate financial statements: Baht 51 million and Baht 128 million, respectively).
48 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
151
17. INTANGIBLE Intangible assets – software 17. ASSETS - SOFTWARE (Unit: Million Baht) Consolidated financial statements For the year ended 31 December 2008
Computer software
Balance -
Balance -
Remaining
beginning
end of
useful life
of the year
0 -10 years
Additions
Disposals
the year
297
235
(27)
505
Less: Amortisation
(84)
(28)
24
(88)
Intangible assets - net
213
207
(3)
417
Amortisation included in the income statement for the year
28
(Unit: Million Baht) Separate financial statements For the year ended 31 December 2008
Computer software
Balance -
Balance -
Remaining
beginning
end of
useful life
of the year
0 – 10 years
Additions
Disposals
the year
218
222
(27)
413
Less: Amortisation
(42)
(18)
24
(36)
Intangible assets - net
176
204
(3)
377 18
As at 31 December 2008, the Bank and its subsidiaries have computer software which have been fully amortised but are still in use with original costs, before deducting accumulated amortisation, amounting to approximately Bath 55 million (separate financial statements: Baht 34 million).
152
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
49
18. ASSETS 18. OTHER Other assets (Unit: Million Baht) Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
Other receivables
585
567
447
470
Accrued premium insurance income
518
752
-
-
Withholding tax refundable
106
32
80
7
Leasehold rights
305
280
299
273
Accrued interest and dividend income receivables
232
202
176
156
Others
788
644
540
416
2,534
2,477
1,542
1,322
Total Less: Allowance for impairment
(108)
Total other assets - net
2,426
(58) 2,419
(97)
(42)
1,445
1,280
19. DEPOSITS Deposits 19. 19.1 Classified by type of deposits (Unit: Million Baht) Consolidated
Separate
financial statements
financial statements
2008
2008
2007
2007
Current
616
530
657
582
Saving
72,870
57,882
73,153
58,177
68
3,440
68
3,440
- Less than 6 months
64,914
48,789
65,209
48,840
- 6 months and up to 1 year
82,947
39,282
82,967
39,282
- Over 1 year
48,748
38,737
48,778
38,765
270,163
188,660
270,832
189,086
Promissory notes Fixed deposits
Total deposits
ď€
50 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
153
19.2 Classified by the remaining period of contracts (Unit: Million Baht)
Not over 1 year *
Separate
financial statements
financial statements
2008
2007
2008
2007
268,749
187,293
269,418
187,719
1,414
1,367
1,414
1,367
270,163
188,660
270,832
189,086
Over 1 year Total deposits
Consolidated
* Included expired contracts
19.3 Classified by currency and countries (Unit: Million Baht) Consolidated financial statements 2008 Domestic Baht US Dollar Other currencies Total
2007
Foreign
Total
270,093
-
270,093
64
1
5 270,162
Domestic
Foreign
Total
188,032
-
188,032
65
628
-
628
-
5
-
-
-
1
270,163
188,660
-
188,660
(Unit: Million Baht) Separate financial statements 2008 Domestic Baht US Dollar Other currencies Total
2007
Foreign
Total
270,762
-
270,762
64
1
5 270,831
Domestic
Foreign
Total
188,458
-
188,458
65
628
-
628
-
5
-
-
-
1
270,832
189,086
-
189,086
As at 31 December 2008, Baht 6,000 million of deposits (2007: Baht 6,000 million) are covered by interest rate swap agreements, as presented in Note 36.1 to the financial statements.
ď€ 154
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
51
20. INTERBANK Interbank and money market items ITEMS (liabilities) 20. AND MONEY MARKET (LIABILITIES) (Unit: Million Baht) Consolidated financial statements 2008 At call
2007
Term
Total
At call
Term
Total
Domestic Bank of Thailand and Financial Institutions Development Fund
-
-
-
-
108
108
61
-
61
4
-
4
securities companies
3,921
493
4,414
1,903
505
2,408
Other financial institutions
2,005
804
2,809
816
366
1,182
Total domestic items
5,987
1,297
7,284
2,723
979
3,702
Baht currency
7
-
7
7
-
7
Total foreign items
7
-
7
7
-
7
5,994
1,297
7,291
2,730
979
3,709
Commercial banks Finance companies and
Foreign
Total
(Unit: Million Baht) Separate financial statements 2008 At call
Term
2007 Total
At call
Term
Total
Domestic Bank of Thailand and Financial Institutions Development Fund Commercial banks
-
-
-
-
108
108
11
-
11
4
-
4
Finance companies and securities companies
3,946
493
4,439
1,966
505
2,471
Other financial institutions
2,106
1,106
3,212
848
367
1,215
Total domestic items
6,063
1,599
7,662
2,818
980
3,798
Foreign Baht currency
7
-
7
7
-
7
Total foreign items
7
-
7
7
-
7
6,070
1,599
7,669
2,825
980
3,805
Total
52 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
155
21. BORROWINGS Borrowings 21. As at 31 December 2008 and 2007, domestic borrowings are as follows: (Unit: Million Baht) Consolidated financial Type of borrowings
Separate financial
Interest rate per annum
Maturity
(as at 31 December 2008)
date
2008
2007
2008
2007
Fixed rate of
Call
122
1,115
-
-
2008
-
1,943
-
1,943
Call
2
-
2
-
2009
44,556
55,025
45,526
55,605
2009
1,650
1,000
1,650
1,000
statements
statements
Short-term borrowings Promissory notes
4.88 - 5.25 percent Subordinated debentures issued in accordance with the plan to establish the Restricted Bank Bills of exchange
Fixed rate of 3.13 - 3.38 percent
Bills of exchange
Fixed rate of 2.13 - 4.25 percent
Bills of exchange
Floating rate of the average MLR of 4 commercial banks minus 3.55 percent
Bills of exchange Bills of exchange
2008
-
450
-
450
2009
200
-
200
-
2009
50
-
50
-
2009
500
-
500
-
47,080
59,533
47,928
58,998
2013 - 2015
8,000
3,000
8,000
3,000
2010
3,000
4,200
3,290
4,490
Fixed rate of 4.62 percent when US-LIBOR–BBA 6 months is in the range of 0 - 7.0 percent
Bills of exchange
Floating rate of THB-THBFIX-REUTERS plus 0.80 percent if THB-THBFIX-REUTERS is in the range of 0 – 7.5 percent
Bills of exchange
Floating rate of US-LIBOR–BBA 6 months plus 0.64 percent
Long-term borrowings Subordinated debentures
Fixed rate of 5.1 and 6.18
issued under Tier II
percent
Bills of exchange
Fixed rate of 4.64 - 4.80 percent
Bills of exchange Bills of exchange
Floating rate of
2009
-
1,650
-
1,650
2010
750
750
750
750
2010
2,320
2,820
2,320
2,820
200
THB-THBFIX-REUTERS plus 0.45 – 0.47 percent Bills of exchange
Floating rate of US-LIBOR-BBA 6 months plus 0.42 - 0.70 percent
Bills of exchange
2009
-
200
-
Bills of exchange
2009
-
50
-
50
14,070
12,670
14,360
12,960
61,150
72,203
62,288
71,958
Total borrowings
156
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
53
As at 31 December 2008, borrowings included borrowings from the Parent Company amounting to Baht 3,000 million in the form of subordinated debentures (2007: Baht 3,000 million). In addition, as at 31 December 2008, borrowings amounting Baht 5,020 million are covered by interest rate swap agreements, as mentioned in Note 36.1 to the financial statements (2007: Baht 8,165 million). 22. OTHER Other liabilities 22. LIABILITIES (Unit: Million Baht) Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
277
230
219
182
786
617
-
-
750
856
750
856
Insurance premium payable
264
625
172
503
Unearned income from hire purchase
212
186
212
186
Provision for corporate income tax
448
187
445
186
Others
712
409
473
261
3,449
3110
2,271
2,174
Other payables Loss reserves and outstanding claims from insurance/life assurance Suspense cash received from account receivables
Total other liabilities
54 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
157
23. REVALUATION Revaluation surplus (deficit) on investments 23. SURPLUS (DEFICIT) ON INVESTMENT (Unit: Million Baht) Consolidated
Separate
financial statements
financial statements
2008
2008
2007
2007
Revaluation surplus on investments Available-for-sale investments Debt instruments
284ď€
1
231
9
37
73
11
57
1
5
1
5
-
21
-
-
322
100
243
71
Equity instruments Held-to-maturity investments (transfer from available-for-sale investments) Surplus recognised for associated company - under equity method - net Total Revaluation deficit on investments Available-for-sale investments Debt instruments Equity instruments
1
(14)
-
(13)
(1,036)
(28)
(275)
(23)
(259)
(355)
(263)
(347)
Held-to-maturity investments (transfer from available-for-sale investments) Deficit recognised for associated company - under equity method - net
(93)
-
-
-
Total
(1,387)
(397)
(538)
(383)
Revaluation deficit on investments
(1,065)
(297)
(295)
(312)
24. STATUTORY Statutory reserve 24. RESERVE Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Bank is required to set aside a statutory reserve at least 5 percent of its net income after deducting accumulated deficit brought forward (if any) until the reserve reaches 10 percent of the registered capital. The statutory reserve is not available for dividend distribution. As at 31 December 2008, the Bank allocated Baht 65,215,999 of net income for the year 2008 to the statutory reserve.
ď€ 158
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
55
25. Capital 25. CAPITALfunds FUNDS The primary objectives of the Bank’s capital management are to maintain the Bank’s ability to continue as a going concern and to maintain a capital adequacy ratio in accordance with the Act on Undertaking of Banking business B.E. 2551. (Unit: Million Baht) 2008
2007
17,346
17,346
2,101
2,101
Statutory reserve
127
78
Retained earnings - unappropriated
687
492
20,261
20,017
7,400
3,000
850
629
-
15
8,250
3,644
28,511
23,661
Tier I Issued and fully paid up share capital Share premium
Total Tier II Subordinated debentures Reserve for loans classified as normal Net revaluation surplus (deficit) on equity instruments Total Total Tier I and Tier II Less: Net revaluation deficit on equity instruments
(264)
Total capital funds
-
28,247
23,661
As at 31 December 2008, the Bank’s capital ratios, calculated based on the BOT’s regulation relating to the calculation of capital funds announced by the BOT dated 27 November 2008 (2007: based on the regulation relating to capital funds dated 27 January 2006), are as follows: 2008
2007 Minimum
Total capital to risk assets (percent) Total Tier I to risk assets (percent)
Minimum
Capital ratio
requirement
Capital ratio
requirement
of the Bank
by BOT
of the Bank
by BOT
11.18
8.50
12.00
8.50
8.02
4.25
10.15
4.25
56 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
159
26. 26. Dividends DIVIDENDS Dividends
Annual dividends for 2007
Approved by
Total dividends
Dividend per share
Million Baht
Baht
Annual General Meeting of the Shareholders on ď€ 23 April 2008
Annual dividends for 2006
746
0.43
219
0.15
Annual General Meeting of the Shareholders on 30 April 2007
27. DEBTSand AND DOUBTFUL ACCOUNTS 27. BAD Bad debts doubtful accounts Bad debts and doubtful accounts in the statements of income for the years ended 31 December 2008 and 2007 consisted of the following: (Unit: Million Baht) Consolidated
Separate
financial statements
financial statements
2008
2008
2007
2007
Bad debts and doubtful accounts of loans and interbank and money market items
3,953
2,703
3,537
2,617
2
(11)
2
(11)
3,955
2,692
3,539
2,606
Amortisation of revaluation allowance for restructured debts for the year Total bad debts and doubtful accounts
28. GAIN Gain (loss) investments 28. (LOSS)onON INVESTMENTS Gain (loss) on investments for the years ended 31 December 2008 and 2007 consisted of the following: (Unit: Million Baht) Separate
financial statements
financial statements
2008
2008
2007
2007
Impairment of investments
(242)
(36)
(98)
(36)
Realised gain (loss) on disposals
(178)
119
(108)
107
Total gain (loss) on investments
(420)
83
(206)
71
ď€ 160
Consolidated
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
57
29. DIRECTORS’ Directors’ remuneration 29. REMUNERATION Directors’ remuneration represents the benefits paid to the directors of the Bank and a public subsidiary company in accordance with Section 90 of the Public Limited Companies Act, including the payment of remuneration amounting to approximately Baht 7 million to the Bank’s directors, which was approved by the Annual General Meeting of Shareholders held on 23 April 2008, exclusive of salaries and related benefits payable to directors who hold executive positions. 30. LOSS Loss on foreclosed and other 30. ONproperty PROPERTY FORECLOSED ANDassets OTHER ASSETS Loss on property foreclosed and other assets for the years ended 31 December 2008 and 2007 consisted of the following: (Unit: Million Baht) Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
16
7
20
6
69
59
64
58
85
66
84
64
Realised loss on disposal of property foreclosed and other assets Increase in allowance for impairment Total loss on property foreclosed and other assets
31. Corporate income tax TAX 31. CORPORATE INCOME Corporate income tax was calculated on net income for the years, after adding back expenses and provisions which are disallowable for tax computation purposes and deducting income which is exempted for tax computation purposes. From 1 January 2007, the Bank changed the method of recording property foreclosed movable assets from recording the cost of such assets at the book value of the receivables on the transfer date, to recording them at the fair value (with reference to appraisal value less estimated selling expenses), providing this does not exceed the legal claim over such receivables. In this regard, the Bank restated the 2006 financial statements to reflect the change, of which the effect was to decrease corporate income tax of the year 2006 by Baht 102 million. In May 2008, the Bank received such tax refund from the Revenue Department and presented such amount under “Corporate income tax refundable” in the income statement.
58 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
161
32. per share 32. Earnings EARNINGS PER SHARE Basic earnings per share is calculated by dividing net income of the Bank’s portion for the years by the weighted average number of ordinary shares in issue during the year. 33. Provident fund 33. PROVIDENT FUND The Bank, its subsidiaries and its employees have jointly established a provident fund in accordance with the Provident Fund Act B.E. 2530. Employees, the Bank and the subsidiaries contributed to the fund monthly at the rate of 5 percent of basic salary. The fund will be paid to the employees upon termination of employment in accordance with the fund rules. During the year 2008, approximately Baht 82 million has been contributed to the fund by the Bank and its subsidiaries (separate financial statements: Baht 56 million). (2008: Baht 54 million in consolidated financial statements and Baht 42 million in separate financial statements). 34. RELATED Related party transactions 34. PARTY TRANSACTIONS During the years, the Bank and its subsidiaries had significant business transactions with its related parties. These transactions have been concluded on commercial terms and based agreed upon in the ordinary course of businesses between the Bank and those companies. Below is a summary of those transactions. (Unit: Million Baht) For the years ended 31 December Consolidated
Separate
financial statements
financial statements
2008
2007
2008
Transfer pricing policy
2007
(For the year 2008)
Transactions occurred during the years Parent company Sales of debt securities
28,443
5,231
-
-
-
346
-
-
Interest income
294
1,278
287
1,275
Income on supporting service
134
170
134
170
Sale of investment in an associated
At market price
company (gain of Baht 7 million) At interest rate of 3.42 – 5.25 percent per annum At the rate agreed under the contract, determined with reference to cost Other income
46
19
-
-
Interest expenses
275
230
256
199
At interest rate of 1.75 – 4.125
Rental expenses
151
128
128
117
At the rate agreed under the
Other expenses
20
50
20
50
559
217
559
217
-
223
-
223
and 6.18 percent per annum
rental contracts
Dividend payment Purchase of fixed assets
162
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
As declared
59
(Unit: Million Baht) For the years ended 31 December Consolidated
Separate
financial statements
financial statements
Transfer pricing policy
2008
2007
2008
2007
(For the year 2008)
Purchase of debt securities
44,703
12,062
2,878
1,797
At market price
Sales of debt securities
44,781
17,805
512
9,040
At market price
-
-
431
-
Transactions occurred during the years (continued) Subsidiary companies
1)
(2008: gain of Baht 12 million in consolidated financial statements and gain of Baht 5 million in separate financial statements 2007: gain of Baht 62 million in consolidated and gain of Baht 61 million in separate financial statements) Purchase of investment in subsidiary company
At net book value of subsidiary company/at par value of ordinary share
Sales of fixed assets
-
1
-
3
Interest and dividend income
-
38
408
111
At interest rate of 3.61 - 4.75 percent per annum and dividend as declared
Income on supporting services
-
66
146
137
At the rate agreed under the contract, determined with reference to cost
Other income
-
58
285
158
Interest expenses
-
28
53
51
At interest rate of 1.0 - 4.875
Rental expenses
-
1
2
6
At the rate agreed under the
Other expenses
-
96
221
241
Purchase of fixed assets
-
-
4
-
percent per annum
rental contracts
Contract rate, determined with reference to appraisal value and book value
Associated company 1) Interest income
3
5
3
5
At interest rate of 3.4 – 4.3
Other income
3
4
-
-
Interest expenses
2
4
2
4
At interest rate of 1.75 – 2.75
Rental expenses
21
16
21
16
At the rate agreed under the
Other expenses
1
-
-
-
percent per annum
percent per annum
rental contracts
1) For comparative purpose, the Bank presents the transaction with its subsidiary and associated companies since the beginning of 2007 as though there are subsidiary and associated companies since then.
60 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
163
(Unit: Million Baht) For the years ended 31 December Consolidated
Separate
financial statements
financial statements
2008
2007
2008
Transfer pricing policy
2007
(For the year 2008)
Transactions occurred during the years (continued) Related companies
1)
Purchase of debt securities
21,047
-
1,226
-
At market price
Sales of debt securities
21,580
6,116
607
52
At market price
8
-
8
-
(2008: gain of Baht 13 million in consolidated and gain of Baht 12 million in separate financial statements) (2007: loss of Baht 1 million in consolidated and separate financial statements) Sale of loans(2008: gain of Baht 2 million in consolidated and
At the rate agreed under the contract
separate financial statements) Transfer of loans and receivables
-
824
-
Transfer of deposits
-
53
-
53
Purchase of fixed assets
-
197
-
197
361
519
333
504
Interest and dividend income
824
At interest rate of 0.50, 0.75 and 1.60 - 8.50 percent per annum and dividend as declared
Income on supporting services
9
13
9
13
At the rate agreed under the contract, determined with reference to cost
Loss on financial derivatives
36
-
36
-
At market price
Other income
37
49
-
-
Interest expenses
71
88
69
88
At interest rate of 1.0 - 4.85 and
Rental expenses
38
27
15
12
At the rate agreed under the
Other expenses
47
32
30
28
186
-
186
-
contracts
9.0 percent per annum
rental contracts
Dividend payment
As declared
1) For comparative purpose, the Bank presents the transaction with its subsidiary and associated companies since the beginning of 2007 as though there are subsidiary and associated companies since then.
164
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
61
The outstanding balances of the above transactions during the years ended 31 December 2008 and 2007 have been shown at the average balance at the end of each month as follows: (Unit: Million Baht) Consolidated
Separate
financial statements
financial statements
2008
2007
2008
2007
7,589
25,126
7,385
25,061
700
623
700
623
4,651
4,204
4,277
3,062
Loans
-
1,369
4,525
2,494
Deposits
-
529
565
498
Interbank and money market items (liabilities)
-
277
344
275
Borrowings
-
650
714
619
206
155
206
155
Loans
87
596
48
-
Deposits
56
34
56
34
4,383
4,874
4,271
4,560
842
866
578
607
Loans
4,962
9,361
4,695
9,203
Deposits
1,403
1,410
1,403
1,410
Interbank and money market items (liabilities)
447
31
402
31
Borrowings
410
870
400
870
Parent company Loans Deposits Borrowings Subsidiary companies
1)
Associated company 1) Investments in debt securities
Related companies 1) Interbank and money market items (assets) Investments in debt securities
1) For comparative purpose, the Bank presents the transaction with its subsidiary and associated companies since the beginning of 2007 as though there are subsidiary and associated companies since then.
62 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
165
The significant outstanding balances of the above transactions are as follows: (Unit: Million Baht) Consolidated financial statements 31 December 2008 Assets
Liabilities
Interbank
Commitments
Interbank
and money Investments market
- debt
items
securities
and money
Loans
Interest
Other
receivables
assets
Deposits
market
Interest
items
Borrowings payable
Other liabilities
Parent company Thanachart Capital Plc.
-
257
4,512
2
29
166
-
6,372
13
14
-
-
-
-
-
7
65
-
-
-
-
64
-
-
3,859
-
2
23
-
-
-
-
-
Associated company MBK Plc. Related companies NFS Asset Management Co., Ltd.
-
714
43
12
10
32
-
-
-
6
-
The Bank of Nova Scotia
7,751
-
-
-
3
-
8
-
-
4
1,194
Other related companies
-
-
146
1
19
814
94
212
11
1
58
7,751
971
8,560
15
70
1,100
102
6,584
24
25
1,316
Advanced Info Service Plc.
(Unit: Million Baht) Consolidated financial statements 31 December 2007 Assets
Liabilities
Interbank
Commitments
Interbank
and money Investments market
- debt
items
securities
and money
Loans
Interest
Other
receivables
assets
market Deposits
Interest
items
Borrowings payable
Other liabilities
Parent company Thanachart Capital Plc.
-
95
12,542
1
20
136
-
4,915
16
11
-
-
271
-
5
6
13
-
-
-
-
56
Associated company MBK Plc. Related companies NFS Asset Management Co., Ltd. Advanced Info Service Plc. The Bank of Nova Scotia Siam Commercial Bank Plc. Siam City Bank Plc. Other related companies
-
-
4,425
-
-
65
-
-
-
-
-
-
700
31
11
24
987
-
-
-
4
-
8,903
-
-
-
-
-
7
-
-
-
-
317
169
-
1
-
-
-
-
-
-
7,452
52
-
-
-
-
-
-
750
3
-
-
-
35
613
3
14
951
14
148
6
27
102
9,272
1,270
17,611
21
64
2,152
21
5,813
25
42
7,610
ď€ 166
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
63
(Unit: Million Baht) Separate financial statements 31 December 2008 Assets
Liabilities
Interbank
Commitments
Interbank
and money Investments market
- debt
items
securities
and money Interest Loans receivables
Other
market
assets
Deposits
22
166
Interest
items
Borrowings
Other
payable liabilities
Parent company Thanachart Capital Plc.
-
-
4,500
-
-
6,250
13
11
-
Subsidiary companies Thanachart Group Leasing -
-
3,645
12
1
19
-
-
-
-
-
T Leasing Co., Ltd.
Co., Ltd.
-
-
824
3
1
24
-
-
-
-
-
Thanachart Securities Plc.
-
-
-
-
2
-
418
-
-
-
-
-
-
-
-
12
285
-
170
3
2
-
-
-
-
-
11
-
403
1,090
11
31
-
Thanachart Insurance Co., Ltd. Thanachart Life Assurance Co., Ltd. National Leasing Co., Ltd.
-
-
-
-
-
5
-
-
-
61
-
Thanachart Broker Co., Ltd.
-
-
-
-
-
327
-
-
-
-
-
-
-
-
-
-
10
-
-
-
-
-
-
-
-
-
-
41
-
-
-
1
-
-
-
-
-
-
10
-
-
-
-
-
-
-
-
-
2
-
8ď€
-
-
-
-
-
-
-
-
7
65
-
-
-
-
64
-
-
3,650
-
-
23
-
-
-
-
-
-
451
40
8
-
32
-
-
-
4
-
The Bank of Nova Scotia
7,751
-
-
-
3
-
8
-
-
4
1,194
Other related companies
-
-
140
1
11
814
93
212
11
-
58
7,751
451
12,799
24
72
1,821
930
7,722
38
114
1,316
Thanachart Legal and Appraisal Co., Ltd. Thanachart Training and Development Co., Ltd. Thanachart Management and Services Co., Ltd. Thanachart Fund Management Co., Ltd. Associated company MBK Plc. Related companies NFS Asset Management Co., Ltd. Advanced Info Service Plc.
ď€
64 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
167
(Unit: Million Baht) Separate financial statements 31 December 2007 Assets
Liabilities
Interbank
Commitments
Interbank
and money Investments market
- debt
items
securities
and money Interest
market
Other
Loans receivables
assets
Deposits
15
136
Interest
items
Borrowings
Other
payable liabilities
Parent company Thanachart Capital Plc.
-
-
12,500
-
-
3,800
13
10
-
Subsidiary companies Thanachart Group Leasing Co., Ltd.
-
-
4,000
-
-
52
-
-
-
-
-
T Leasing Co., Ltd.
-
-
294
1
-
45
-
-
-
-
-
Thanachart Securities Plc.
-
-
-
-
1
-
62
-
-
-
-
-
-
-
-
7
174
-
-
-
-
-
-
-
-
-
18
-
37
870
13
-
-
National Leasing Co., Ltd.
-
-
-
-
-
6
-
-
-
54
-
Thanachart Broker Co., Ltd.
-
-
-
-
-
154
-
-
-
-
-
-
-
-
-
-
13
-
-
-
-
-
-
-
-
-
-
18
-
-
-
6
-
-
-
-
-
1
10
-
-
-
8
-
-
-
-
-
2
-
5
-
-
-
-
-
271
-
5
6
13
-
-
-
-
56
-
-
4,250
-
-
65
-
-
-
-
-
-
450
24
8
-
987
-
-
-
4
-
8,903
-
-
-
-
-
7
-
-
-
-
8
169
-
1
-
-
-
-
-
-
7,452
46
-
-
-
-
-
-
750
3
-
-
Thanachart Insurance Co., Ltd. Thanachart Life Assurance Co., Ltd.
Thanachart Legal and Appraisal Co., Ltd. Thanachart Training and Development Co., Ltd. Thanachart Management and Services Co., Ltd. Thanachart Fund Management Co., Ltd. Associated company MBK Plc. Related companies NFS Asset Management Co., Ltd. Advanced Info Service Plc. The Bank of Nova Scotia Siam Commercial Bank Plc. Siam City Bank Plc. Other related companies
-
22
597
2
2
951
14
148
6
-
102
8,957
912
21,665
17
52
2,624
125
5,568
35
82
7,610
ď€ 168
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
65
As at 31 December 2008 and 2007, the Bank has loans to parent, subsidiary and related companies within Thanachart Group as mentioned in Note 11.9 to the financial statements. As at 31 December 2008, the Bank and its subsidiaries have investments amounting to approximately Baht 220 million (Baht 62 million in the separate financial statements) in related companies to which they are related by means of members of their management being shareholders and/or directors of those companies (2007: Baht 233 million in the consolidated financial statements and Baht 62 million in the separate financial statements). As at 31 December 2008 and 2007, the Bank and its subsidiaries have the following related parties transactions with executive employees of the Bank and companies within Thanachart Group from department manager level up, including related persons who together with these employees: (Unit: Million Baht)
Loans Deposits
Consolidated
Separate
financial statements
financial statements
2008
2007
2008
67
48
67
48
496
399
496
399
2007
Directors and management’s remuneration During the year 2008, the Bank and its subsidiaries paid salary, bonus, meeting allowance and gratuities to their key management personnel, including directors, 73 persons totaling Baht 221 million (separate financial statements: 18 persons totaling Baht 59 million). (2007: Baht 111 million in the consolidated financial statements and Baht 42 million in the separate financial statements).
ď€
66 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
169
35. FINANCIAL Financial information by segment 35. INFORMATION BY SEGMENT The Bank and its subsidiaries’ business operations involve 3 principal segments: (1) Banking business (2) Securities business and (3) Life insurance business. These operations are carried on in Thailand. Below is the consolidated financial information of the Bank and its subsidiaries for the years ended 31 December 2008 and 2007 by segment. (Unit: Million Baht) For the year ended 31 December 2008 Banking
Securities
Life insurance
Other
business
business
business
business
6,920
112
348
266
-
-
-
-
2,286
1,238
4,683
3,139
(799)
10,547
(7,788)
(1,035)
(4,513)
(2,994)
794
(15,536)
(216)
(95)
(168)
(209)
-
(688)
-
102
Eliminations
Total
Net interest and dividend income after bad debts and doubtful accounts and loss on debt restructuring
(324)
7,322
Share of income from investments accounted for under equity method Non-interest income Non-interest expenses Corporate income tax
153
153
Corporate income tax refundable Net income
102
-
-
-
1,304
220
350
202
(176)
1,900
(Unit: Million Baht) For the year ended 31 December 2007 Banking
Securities
Life insurance
Other
business
business
business
business
5,131
65
114
105
-
-
-
-
2,005
859
2,281
1,408
(521)
6,032
(6,104)
(501)
(2,308)
(1,351)
359
(9,905)
Corporate income tax
(41)
(123)
(21)
(74)
-
(259)
Net income
991
300
66
88
Eliminations
Total
Net interest and dividend income after bad debts and doubtful accounts and loss on debt restructuring
(15)
5,400
Share of income from investments accounted for under equity method Non-interest income Non-interest expenses
170
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
79
(98)
79
1,347
67
(Unit: Million Baht) As at 31 December 2008 Life
Investments - net
Banking
Securities
insurance
Other
business
business
business
business
26,586
701
5,788
2,102
(4,465)
30,712
330,534
2,436
2,840
6,152
(6,916)
335,046
Eliminations
Total
Loans and accrued interest receivable - net (including interbank and money market items) Land, premises and 2,014
107
139
50
Other assets
equipment - net
9,138
175
284
905
(223)
-
10,279
2,310
Total assets
368,272
3,419
9,051
9,209
(11,604)
378,347
(Unit: Million Baht) As at 31 December 2007 Life
Investments - net
Banking
Securities
insurance
Other
business
business
business
business
19,968
1,020
5,041
1,975
(4,832)
23,172
259,286
2,493
1,440
6,539
(5,763)
263,995
Eliminations
Total
Loans and accrued interest receivable - net (including interbank and money market items) Land, premises and 1,783
131
117
56
Other assets
equipment - net
10,061
357
435
905
(225)
-
11,533
2,087
Total assets
291,098
4,001
7,033
9,475
(10,820)
300,787
36. COMMITMENTS Commitments and contingent liabilities 36. AND CONTINGENT LIABILITIES As at 31 December 2008 and 2007, significant commitments and contingent liabilities consisted of:
68 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
171
36.1 (Unit: Million Baht) Consolidated financial statements 2008
2007
Foreign Baht Aval to bills Liability under unmatured import bills Letter of credits
currency
Foreign Total
Baht
currency
Total
118
-
118
24
-
24
69
374
443
-
25
25
1
663
664
-
399
399
Other obligations Foreign exchange contracts - Bought
-
8,519
8,519
-
1,555
1,555
- Sold
-
36,161
36,161
-
37,776
37,776
- Bought
-
5,169
5,169
-
-
-
- Sold
-
4,846
4,846
-
1,350
1,350
Cross currency and interest rate swap contracts
Interest rate swap contracts - Bought
12,270
-
12,270
14,165
-
14,165
- Sold
12,270
-
12,270
14,165
-
14,165
4,164
-
4,164
2,673
-
2,673
Committed (but not draw) overdraft Others Total
3,083
34
3,117
2,467
495
2,962
31,975
55,766
87,741
33,494
41,600
75,094
(Unit: Million Baht) Separate financial statements
Baht Aval to bills
2008
2007
Foreign
Foreign
currency
Total
Baht
currency
Total
118
-
118
24
-
24
69
374
443
-
25
25
1
663
664
-
399
399
- Bought
-
8,519
8,519
-
1,555
1,555
- Sold
-
36,161
36,161
-
37,776
37,776
- Bought
-
5,169
5,169
-
-
-
- Sold
-
4,846
4,846
-
1,350
1,350
- Bought
11,970
-
11,970
14,165
-
14,165
- Sold
11,970
-
11,970
14,165
-
14,165
Liability under unmatured import bills Letter of credits Other obligations Foreign exchange contracts
Cross currency and interest rate swap contracts
Interest rate swap contracts
Committed (but not draw) overdraft
4,164
-
4,164
2,673
-
2,673
Others
3,037
34
3,071
2,439
495
2,934
31,329
55,766
87,095
33,466
41,600
75,066
Total
ď€ 172
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
69
36.2 During the years 2001 and 2002, the Bank entered into agreements to transfer nonperforming loans and receivables of approximately Baht 296 million to TAMC. The Bank is still jointly liable for a share of the gains and losses arising from TAMC’s management of these non-performing assets to be calculated at the end of the fifth year and tenth year, counting from 1 July 2001. If there are losses, the Bank is liable for all initial losses up to 20 percent of the transfer price, while further losses of up to another 20 percent of the transfer price are to be shared equally between the Bank and TAMC, and TAMC is liable for all remaining losses. Such gains and losses will be determined based on the accumulated value of collections made on the assets at the date of determination, minus transfer costs and all operating expenses of TAMC, including interest on the debt instruments issued to purchase the loans and receivables. The gain or loss cannot be estimated at this stage, but as at 31 December 2008, the Bank has estimated its share of the losses which may arise from the management of the non-performing assets at approximately Baht 89 million. This amount has been presented as a part of allowance for impairment of long-term investments in debt securities (2007: estimated share of losses at Baht 89 million). 36.3 The Bank has entered into agreements to sell housing loans/transfer rights to the Secondary Mortgage Corporation, under which it is committed to compensate the Corporation for losses from uncollected housing loans up to a maximum of 20 percent of the valuation of the said receivables. As at 31 December 2008, its maximum obligation is Baht 3 million. 36.4 As at 31 December 2008, the Bank and its subsidiaries have commitments to pay the service fees in relation to property foreclosed, computer system services and other services, including commitments in respect of office rental and related service fees under long-term rental contracts, as follow: (Unit: Million Baht)
Year
Consolidated
Separate
financial statements
financial statements
Other
Parent
Other
Parent
Subsidiary
parties
company
parties
company
companies
2009
492
104
444
93
10
2010
315
59
276
58
-
2011 onward
469
26
417
26
-
In addition, the Bank has obligations to pay an administrative fee to a subsidiary company, determined at actual cost plus a margin, for the period stipulated in the agreement.
ď€
70 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
173
36.5 As at 31 December 2008, a subsidiary company has commitment under a research support and distribution services agreement made with an overseas company, whereby it must pay service charges on a quarterly basis at the rate specified in the agreement. The agreement will expire on 30 September 2009. 36.6 Under the agreements among the Parent Company, the Bank and BNSAL (BNSAL had transferred all rights and obligations under these agreements to BNS on 11 January 2008), the Parent Company and the Bank have to disclose information relating to the business, business performance, operations, and legal compliance of the Bank and the Bank’s subsidiaries, and certify the correctness of the disclosed information, to assist BNS in deciding whether to purchase shares in the Bank. In the event that the Bank or its subsidiaries have to pay any damages, compensation or penalties to any other parties as a result of events or information that the Parent Company and the Bank did not disclose to BNS before BNS purchased the shares of the Bank, the Parent Company and the Bank will jointly compensate BNS for its losses in accordance with the principles stipulated in the agreements, but not beyond the prescription period stipulated by Thai laws for each claim for damages. In addition, under the Shareholders’ Agreement between the Parent Company and BNS there are mutual agreements whereby the Parent Company, the Bank and the Bank’s subsidiaries, and BNS have certain stipulated rights and obligations per the conditions therein with no expiry date. However, the management of the Bank and the Parent Company believe that the Bank and the Bank’s subsidiaries, and the Parent Company operate their businesses under adequate supervision and therefore no material losses will result that would significantly affect the Parent Company, the Bank and its subsidiaries’ financial positions. 37. LITIGATION Litigation 37. As at 31 December 2008, the Bank and its subsidiaries have contingent liabilities amounting to approximately Baht 523 million (separate financial statements: Baht 475 million) as a result of litigation. However, the Bank and its subsidiaries’ management expect that no losses will result and therefore no liabilities are currently recorded.
174
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
71
38. FINANCIAL Financial instruments 38. INSTRUMENTS Financial instruments are any contracts which give rise to both a financial assets of one enterprise and a financial liability or equity instruments of another enterprise. 38.1 Credit risk Credit risk is the risk that the party to a financial instrument will fail to fulfill the obligation, causing the Bank and its subsidiaries to incur a financial loss. The amount of maximum credit risk exposure is the carrying amount of the financial assets less provision for losses as stated in the balance sheet and the off-balance sheet transactions of avals, guarantees of loans, other guarantees and derivative contracts. In addition, the Bank and its subsidiaries manage credit risk by the following means, in through careful consideration of credit approval process, analysis of risk factors, the ability to service debt of customers and credit review process, which examines and reviews the quality of the Bank and its subsidiaries’ loan portfolio so as to prevent and provide a remedy for problem loans in the future. 38.2 Market risk Market risk is the risk that changes in interest rates, foreign exchange rates and securities prices may have an effect on the Bank and its subsidiaries’ foreign currency position and investment status. As such, market risk consists of interest rate risk, foreign exchange risk and equity position risk. a)
Interest rate risk
Interest rate risk is the risk that the value of financial instrument will fluctuate as a result of changes in market interest rates. The Bank and its subsidiaries manage the changes in interest rate risk by means of an appropriate structuring of holdings in assets and liabilities with different Repricing dates, taking into account the direction of market interest rates, in order to generate a suitable yield while maintaining risk at acceptable levels. Such management is under the supervision of the Asset and Liability Management Committee.
ď€
72 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
175
As at 31 December 2008 and 2007, financial assets and liabilities classified by types of interest rate are as follows: (Unit: Million Baht) Consolidated financial statements 2008
Transactions
2007
Floating
Fixed
Non-
interest
interest
interest
rate
rate
bearing
Total
Floating
Fixed
Non-
interest
interest
interest
rate
rate
bearing
Total
Financial assets Cash Interbank and money market items
-
-
4,018
4,018
-
-
3,275
3,275
305
60,876
4,371
65,552
420
36,190
3,317
39,927
Securities purchased under resale -
-
-
-
-
2,500
-
2,500
Investments
agreements
-
27,547
4,208
31,755
-
19,518
3,709
23,227
Receivable from clearing house
-
-
50
50
-
-
244
244
38,353
235,650
2,139
276,142
28,993
198,307
1,476
228,776
76,259
193,288
616
270,163
60,355
127,775
530
188,660
5,330
1,347
614
7,291
2,134
979
596
3,709
Loans
(1)
Financial liabilities Deposit Interbank and money market items Payment to clearing house
-
-
295
295
-
-
-
-
Securities business payable
-
-
855
855
-
-
1,244
1,244
Liabilities payable on demand
-
-
1,317
1,317
-
-
1,329
1,329
Borrowings
-
61,150
-
61,150
10
72,193
-
72,203
(1) The outstanding balances of loans which have floating interest rates or fixed interest rates include loans on which interest recognition is discontinued.
(Unit: Million Baht)
Separate financial statements 2008
Transactions
2007
Floating
Fixed
Non-
Floating
Fixed
Non-
interest
interest
interest
interest
interest
interest
rate
rate
bearing
rate
rate
bearing
Total
Total
Financial assets Cash Interbank and money market items
-
-
4,017
4,017
-
-
3,274
3,274
18
59,236
4,272
63,526
2
35,448
3,065
38,515
Securities purchased under resale agreements Investments Loans(1)
-
-
-
-
-
2,500
-
2,500
-
21,216
5,612
26,828
-
14,370
5,679
20,049
37,340
234,675
910
272,925
27,834
196,604
502
224,940
76,543
193,632
657
270,832
60,650
127,854
582
189,086 3,805
Financial liabilities Deposits Interbank and money market items
5,432
1,599
638
7,669
2,165
980
660
Liabilities payable on demand
-
-
1,317
1,317
-
-
1,329
1,329
Borrowings
-
62,288
-
62,288
-
71,958
-
71,958
(1) The outstanding balances of loans which have floating interest rates or fixed interest rates include loans on which interest recognition is discontinued.
176
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
73
With respect to financial instruments that carry fixed interest rates, the periods from the balance sheet date to the Repricing or maturity date (whichever is the earlier) are presented below: (Unit: Million Baht) Consolidated financial statements as at 31 December 2008 Repricing or maturity date
Transactions
At call
Weighted
0-3
3 - 12
1-5
Over 5
months
months
years
years
average Total
interest rates Percent
Financial assets Interbank and money market items Investments Loans
129
60,547
200
-
-
-
3,525
8,438
13,986
9,012
6,330
12,239
166,172
4
107,810
85,432
42
50
1,060
237
-
124
38,280
8,676
9,070
60,876
2.59 – 3.89
1,598
27,547
4.18 – 4.59
41,897
235,650
7.97 – 9.99
-
193,288
3.49
-
1,347
3.56
61,150
3.71
Financial liabilities Deposits Interbank and money market items Borrowings
5,000
(Unit: Million Baht) Consolidated financial statements as at 31 December 2007 Repricing or maturity date
Transactions
At call
Weighted
0-3
3 - 12
1-5
Over 5
months
months
years
years
average Total
interest rates Percent
Financial assets Interbank and money market items
87
34,447
1,656
-
-
36,190
5.14
-
2,500
-
-
-
2,500
3.22
-
3,007
2,328
11,452
2,731
19,518
3.83 - 4.03
17,168
4,409
5,024
139,279
32,427
198,307
7.58
Deposits
8
65,794
61,392
581
-
127,775
3.11
Interbank and money market items
-
787
192
-
-
979
2.84
1,105
49,010
12,308
6,770
3,000
72,193
Securities purchased under resale agreements Investments Loans Financial liabilities
Borrowings
4.18 - 5.25
74 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
177
(Unit: Million Baht) Separate financial statements as at 31 December 2008 Repricing or maturity date
Transactions
At call
Weighted
0-3
3 - 12
1-5
Over 5
months
months
years
years
average Total
interest rates Percent
Financial assets Interbank and money market items
129
59,107
-
-
-
59,236
2.59
-
1,877
7,448
11,316
575
21,216
4.59
13,463
6,276
11,880
162,548
40,508
234,675
7.97
Deposits
4
108,104
85,482
42
-
193,632
3.49
Interbank and money market items
-
1,211
388
-
-
1,599
3.56
Borrowings
2
38,750
9,176
9,360
5,000
62,288
3.71
Investments Loans Financial liabilities
(Unit: Million Baht) Separate financial statements as at 31 December 2007 Repricing or maturity date
Transactions
At call
Weighted
0-3
3 - 12
1-5
Over 5
months
months
years
years
average Total
interest rates Percent
Financial assets Interbank and money market items
57
34,041
1,350
-
-
35,448
5.14
-
2,500
-
-
-
2,500
3.22
-
1,455
793
10,025
2,097
14,370
4.03
21,420
4,374
4,762
134,421
31,627
196,604
7.22
Deposits
8
65,844
61,421
581
-
127,854
3.11
Interbank and money market items
-
787
193
-
-
980
2.84
Borrowings
-
49,590
12,308
7,060
3,000
71,958
4.18
Securities purchased under resale agreements Investments Loans Financial liabilities
ď€ 178
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
75
In addition, the average balances of the financial assets and liabilities of the Bank and its subsidiaries generating revenues and expenses, calculated based on the average balances outstanding during the years, and the average interest and dividend rate for the years ended 31 December 2008 and 2007 can be summarised as follows: (Unit: Million Baht) Consolidated financial statements For the years ended 31 December 2008
2007
Interest
Interest
Average
and
Average
Average
and
Average
balances
dividend
rate (%)
balances
dividend
rate (%)
40,042
1,529
3.82
22,520
776
3.62
962
31
3.24
11,415
446
3.91
Interest bearings financial assets Interbank and money market items Securities purchased under resale agreements Investments Loans/hire purchase and finance leases
23,659
1,243
5.25
25,843
1,142
4.80
266,284
17,884
6.72
209,699
15,125
7.35
229,311
7,031
3.07
198,078
7,148
3.61
6,843
184
2.69
4,205
123
2.93
55,855
2,182
3.91
47,488
2,125
4.65
Interest bearings financial liabilities Deposits Interbank and money market items Borrowings
(Unit: Million Baht) Separate financial statements For the years ended 31 December 2008
2007
Interest
Interest
Average
and
Average
Average
and
Average
balances
dividend
rate (%)
balances
dividend
rate (%)
39,608
1,480
3.74
20,406
737
3.61
962
31
3.24
11,415
446
3.91
23,845
1,094
4.59
24,818
1,042
4.20
264,135
17,291
6.55
207,454
14,898
7.18
229,837
7,046
3.07
198,481
7,154
3.60
6,835
191
2.80
3,922
124
3.16
56,194
2,191
3.90
46,929
2,108
4.49
Interest bearings financial assets Interbank and money market items Securities purchased under resale agreements Investments Loans/hire purchase and finance leases Interest bearings financial liabilities Deposits Interbank and money market items Borrowings
ď€
76 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
179
b)
Foreign exchange risk
Foreign exchange risk is the risk that changes in foreign exchange rates may result in changes in the value of financial instruments, and fluctuations in revenues or the values of financial assets and liabilities. Since the Bank has foreign exchange transactions, it may be exposed to foreign exchange risk. However, the Bank has a policy to hedge this foreign exchange exposure through management of its net exchange position and operating in accordance with a risk management policy which has been approved by its Board of Directors and is in strict accordance with BOT guidelines. The status of the Bank’s foreign currency balances as at 31 December 2008 and 2007 can be summarised as follows:
(Unit: Million Baht) Consolidated and separate financial statements 2008
2007
Outstanding balance
Outstanding balance
of financial instruments
of financial instruments
US Dollar
US Euro
Yen
Others
Dollar
Euro
Yen
Others
In balance foreign currency Cash Interbank and money market items
50
98
88
36
107
60
3
44
20,658
98
65
47
35,635
73
18
56
Investments
699
-
-
4,148
1,350
-
-
-
Loans
955
68
-
-
399
-
-
-
Other assets
8
-
-
12
14
-
-
-
Total assets
22,370
264
153
4,243
37,505
133
21
100
65
-
-
5
628
-
-
-
Deposits Total Liabilities
65
-
-
5
628
-
-
-
22,305
264
153
4,238
36,877
133
21
100
import bills
291
-
83
-
16
9
-
-
Letter of credits
472
165
-
26
379
2
2
16
Net Off balance foreign currency Liability under unmatured
Foreign exchange contracts - Bought - Sold
8,393
10
27
89
1,337
-
10
208
35,239
398
281
243
37,084
260
61
371
5,169
-
-
-
-
-
-
-
Cross currency and interest rate swap contracts - Bought - Sold Others
699
-
-
4,147
1,350
-
-
-
34
-
-
-
297
-
-
198
ď€ 180
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
77
c)
Equity position risk
Equity position risk is the risk that changes in the market prices of equity securities which will result in fluctuations in revenue and the value of financial assets. 38.3 Liquidity risk Liquidity risk is the risk that the Bank and its subsidiaries will be unable to liquidate their financial assets and/or procure sufficient funds to discharge their obligations in a timely manner, resulting in the Bank and its subsidiaries incurring a financial loss. The Bank and its subsidiaries manage liquidity risk by means of appropriate structuring of short-term and long-term sources of capital. In addition, the Bank has a policy to maintain liquidity in line with the liquidity maintenance principles stipulated by the BOT, to ensure that it has sufficient liquidity to meet both present and future requirements. Counting from the balance sheet date, the periods to maturity of financial instruments held as at 31 December 2008 and 2007 are as follows: (Unit: Million Baht) Consolidated financial statements 2008
Transactions
At call
Less than
Over
1 year
1 year
2007
Unspecified
Total
Less than
Over
1 year
1 year
At call
Unspecified
Total
Financial assets Cash
4,018
-
-
-
4,108
3,275
-
-
-
3,275
Interbank and money market items (1)
5,105
60,447
-
-
65,552
3,793
36,134
-
-
39,927
-
-
-
-
-
-
2,500
-
-
2,500
Investments
-
6,886
20,701
4,168
31,755
-
4,175
15,378
3,674
23,227
Receivable from clearing house
-
50
-
-
50
-
244
-
-
244
19,640
77,571
178,931
-
276,142
24,100
55,946
148,730
-
228,776
73,686
195,063
1,414
-
270,163
58,482
128,811
1,367
-
188,660 3,709
Securities purchased under resale agreements
Loans (2) Financial liabilities Deposits Interbank and money market items
5,994
1,297
-
-
7,291
2,730
979
-
-
Payable to clearing house
-
295
-
-
295
-
-
-
-
-
Securities business payable
-
855
-
-
855
-
1,244
-
-
1,244
Liability payable on demand
1,317
-
-
-
1,317
1,329
-
-
-
1,329
124
46,956
14,070
-
61,150
1,115
58,418
12,670
-
72,203
Aval to bill
-
106
12
-
118
-
24
-
-
24
Liability under unmatured import bills
-
360
83
-
443
-
25
-
-
25
48
616
-
-
664
8
391
-
-
399
4,310
51,611
29,534
1,061
86,516
2,767
46,742
23,841
1,296
74,646
Borrowings Off-balance sheet items
Letter of credits Other contingencies
(1) The outstanding balances of interbank and money market items at call include the item for which revenue recognition has been discontinued. (2) The outstanding balances of loans at call include loans for which revenue recognition has been discontinued.
ď€
78 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
181
(Unit: Million Baht) Separate financial statements 2008
Transactions
At call
Less than
Over
1 year
1 year
2007
Unspecified
Total
Less than
Over
1 year
1 year
At call
Unspecified
Total
Financial assets Cash
4,017
-
-
-
4,017
3,274
-
-
-
3,274
Interbank and money market items
4,419
59,107
-
-
63,526
3,124
35,391
-
-
38,515
Securities purchased under resale agreements
-
-
-
-
-
-
2,500
-
-
2,500
-
4,248
17,008
5,572
26,828
-
1,087
13,318
5,644
20,049
22,573
74,668
175,684
-
272,925
27,203
52,787
144,950
-
224,940
74,010
195,408
1,414
-
270,832
58,829
128,890
1,367
-
189,086
Interbank and money market items
6,070
1,599
-
-
7,669
2,825
980
-
-
3,805
Liability payable on demand
1,317
-
-
-
1,317
1,329
-
-
-
1,329
2
47,926
14,360
-
62,288
-
58,998
12,960
-
71,958
-
106
12
-
118
-
24
-
-
24
Investments Loans (1) Financial liabilities Deposits
Borrowings Off-balance sheet items Aval to bill Liability under unmatured import bills
-
360
83
-
443
-
25
-
-
25
48
616
-
-
664
8
391
-
-
399
4,310
51,611
28,888
1,061
85,870
2,767
46,742
23,813
1,296
74,618
Letter of credits Other contingencies
(1) The outstanding balances of loans at call include loans for which revenue recognition has been discontinued.
38.4 Fair value Fair value represents the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. The Bank and its subsidiaries have estimated the fair value of financial instruments as follows: a)
Financial assets
The method used for determining the fair value depends upon the characteristics of the financial instruments. The fair values of most financial assets are presented at the amount stated in the balance sheet, including cash, interbank and money market items, receivables from clearing house and loans. These financial assets have their fair value approximate to their respective carrying value since the values of these financial instruments are predominantly subject to market interest rates. Financial instruments with standard terms and conditions which are traded on an active and liquid market, such as investments, have their fair values determined by the quoted market price.
ď€ 182
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
79
b)
Financial liabilities
The fair values of financial liabilities, including deposits, interbank and money market items, payable to clearing house, securities business payable, liabilities payable on demand, and borrowings, are considered to approximate their respective carrying values for the same reasons as described above. As at 31 December 2008, there are no material differences between the book value of financial instruments of the Bank and its subsidiaries and their fair value. However, the fair value of held-to-maturity debt securities is Baht 1,354 million greater than their book value (the separate financial statements: a fair value Baht 1,171 million greater than their book value) and the fair value of investments in an associated company is Baht 78 million lower than its book value. 38.5 Financial derivatives The Bank and its subsidiaries engage in financial derivatives activities as required in the normal course of their business to manage risk and to meet their clients’ needs. These financial derivatives include forward foreign currency contracts, cross currency and interest rate swap contracts, and interest rate swap contracts. The Bank and its subsidiaries have a policy to hedge the risk limits by which it requires risk reporting and control procedures for the various types of risk, as a control over financial derivative activities. The Bank and its subsidiaries manage the credit risk associated with financial derivatives on the basis of the credit limits granted to customers in general. The same credit approval process that is used when granting loans to a customer is adopted for financial derivative customers, so that the Bank and its subsidiaries are able to maintain risk at acceptable levels.
ď€
80 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
183
As at 31 December 2008 and 2007, the Bank and its subsidiaries have financial derivatives as classified by their maturities as follows: (Unit: Million Baht) Consolidated financial statements 2008 Less than
Over
1 year
1 year
2007
Total
Less than
Over
1 year
1 year
Total
Foreign exchange contracts - Bought
8,519
-
8,519
1,555
-
1,555
36,161
-
36,161
37,776
-
37,776
-
5,169
5,169
-
-
-
524
4,322
4,846
675
675
1,350
950
9,070
10,020
450
10,020
10,470
- Paid floating interest rate
1,450
800
2,250
2,245
1,450
3,695
- Received fixed interest rate
1,450
800
2,250
2,245
1,450
3,695
950
9,070
10,020
450
10,020
10,470
- Sold Cross currency and interest rate swap contracts - Bought - Sold Interest rate swap contracts - Paid fixed interest rate
- Received floating interest rate
(Unit: Million Baht) Separate financial statements 2008 Less than
Over
1 year
1 year
2007
Total
Less than
Over
1 year
1 year
Total
Foreign exchange contracts - Bought - Sold
8,519
-
8,519
1,555
-
1,555
36,161
-
36,161
37,776
-
37,776
-
5,169
5,169
-
-
-
524
4,322
4,846
675
675
1,350
Cross currency and interest rate swap contracts - Bought - Sold Interest rate swap contracts - Paid fixed interest rate
950
9,070
10,020
450
10,020
10,470
- Paid floating interest rate
1,450
500
1,950
2,245
1,450
3,695
- Received fixed interest rate
1,450
500
1,950
2,245
1,450
3,695
950
9,070
10,020
450
10,020
10,470
- Received floating interest rate
ď€ 184
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
81
39. RECLASSIFICATION Reclassification 39. The Bank has reclassified certain amounts in the financial statements for the year ended 31 December 2007 to conform to the current year’s
classifications and to
comply with the BOT regulations as announced in the year 2008, with no effect on previously reported net income and shareholders’ equity. Reclassifications are as follows:
(Unit: Million Baht)
Consolidated financial statements
Separate financial statements
As previously
As reclassified
Deposits in Baht
reported
As previously As reclassified
reported
188,032
190,492
188,458
190,918
3,113
4,173
3,145
4,205
Short-term borrowings
59,533
59,083
58,998
58,548
Long-term borrowings
12,670
9,600
12,960
9,890
7,148
7,262
7,154
7,268
123
172
124
173
- Short-term borrowings
1,268
1,260
1,244
1,235
- Long-term borrowings
857
703
864
710
Domestic interbank and money market items - Interest bearing
Interest expenses - Deposits - Interbank and money market items
Approval ofOF financial statements 40. APPROVAL FINANCIAL STATEMENTS These financial statements were authorised for issue by the Bank’s Board of Directors on 23 February 2009.
82 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
185
remuneration for the Auditor
The Audit Committee determines the qualification and performance of the auditor and requests the approval for the selection and remuneration of the auditor from Thanachart Bank’s Board of Directors, in order to obtain the further approval in the shareholder meeting. The proposed auditors must be approved by the Bank of Thailand. Thus, the Bank of Thailand officially informed by For. Kor. Tor. (02) 258/2550 on Subject about the permission of the Bank of Thailand on an auditor for the accounting year 2007 on 22 March 2007. The three auditors are named as following. 1. Ms. Ratana Jala Certified Auditor No. 3734; or 2. Ms. Rungnapha Lertsuwankul Certified Auditor No. 3516; or 3. Mr. Narong Pantawongs Certified Auditor No. 3315 of Ernst & Young Office Limited, being the auditors of the Bank. • The Relationship of the auditors and the Bank The proposed auditors have no relationship in any fields with the Bank. • The matter of the auditors of subsidiaries and associated companies in Thanachart Group Thanachart Bank as one of subsidiaries of Thanachart Capital Public Company Limited, the Bank thus proposed Ernst & Young Office Limited which was an auditor of Thanachart Group being an auditor. In 2008, the Bank paid Ernst & Young Office Limited for the audit services and other services which charged the following 1. Audit Fee Thanachart Bank Public Company Limited paid audit fees to Ernst & Young Office Limited with details as follows: 1.1 Audit fee worth 6,550,000 baht was paid for auditing the financial statement of the previous year, which was signed by Ms. Ratana Jala, Certified Public Accountant. 1.2 Other payment worth 253,978 baht which related to the auditing of the financial statements for the past year was made to the audit firm the Certified Public Accountant belonged to. 2. Non - Audit Fee Thanachart Bank made payments for other services including special audits in line with the requirements of the Bank of Thailand for 350,000 baht and there was no fee to be paid in the future for the contacted services not yet rendered in the past fiscal year. Apart from the fees mentioned in 1 and 2 above, there was no other fee for the past year that the Bank had to pay to the auditors of the Bank, the audit firm Certified Public Accountant belonged to, persons or businesses related to Certified Public Accountant and the audit firm Certified Public Accountant belonged to.
186
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
corporate governance
Thanachart Bank Public Company Limited and member companies of Thanachart Group have adopted the same principles and standards of corporate governance, with Thanachart Capital Public Company Limited as a parent company of Thanachart Bank, which is listed on the Stock Exchange of Thailand (SET). According to the survey results presented in the Corporate Governance Report of Thai Listed Companies 2008
(CGR 2008), Thanachart Capital was rated “excellent” with scores ranging from 80 - 89. The evaluation
of the Annual General Meeting of Shareholders of listed companies, Thanachart Capital was rated “excellent”. The achievement shows that Thanachart Group recognizes the importance of putting in place good corporate governance process. This is mainly because good corporate governance is a basic factor that helps enhance
the efficiency of business operations. It also enables the Group to achieve a sustainable growth that is well accepted both locally and overseas. The sustainable growth will, in turn, enable the Group to achieve an important goal that brings about the maximum benefits for all parties concerned. These include shareholders, investors, and other stakeholders as well as society as a whole. Since 2006, the SET has promoted the good corporate governance for all listed companies.
The 15 principles of good corporate governance were reviewed and improved. The revised principles are divided into five groups including shareholders’ rights, equitable treatment of shareholders, roles of stakeholders, information disclosure and transparency, and responsibilities of the Board of Directors. Although currently
the Bank is not listed on the SET, Thanachart Bank continues to adhere to the five groups of good corporate governance principles and the related practices. The actions undertaken by the Bank can be summarized
as follows: 1. Rights and Equitable Treatment of Shareholders Thanachart Group respects the rights of the shareholders. As a result, it has specified the rights of
the shareholders and the practice of equitable treatment of the shareholders in Thanachart Group’s good corporate governance policy. The policy is based on the good corporate governance principles and the best practices. It covers the right to attend the shareholders’ meetings, the right to appoint proxies to attend
the meetings and vote on their behalf, the right to propose a list of person to work as director, the right to cast votes on various business matters, the right to receive dividend, the right to express opinions and ask questions at shareholders’ meetings, and the right to receive adequate information in a timely manner. In holding the annual general meeting of the shareholders, Thanachart Bank will send the shareholders in advance before the meeting, information about the date, time and venue of the meeting as well as information supporting the meeting agenda and the related opinions of the Board of Directors, specifying clearly which agenda item is for information only or for consideration. The same information is also made available on the Bank’s website. The information will include details about the various agenda items as well as adequate supporting documents for decision making on various agenda items. Moreover, in order to protect the right of the shareholders to attend the meeting, the notification to the shareholders gives details about the necessary documentation and evidence that have to be brought by them on the date of the meeting. The proxy statement is also sent with the notification in case the shareholders wish to appoint a proxy to attend the meeting on their behalf. To facilitate this, the Bank makes an arrangement that the Chairman of the Bank’s Audit Committee is one of the persons whom the shareholders may appoint as their proxy to attend the meeting on their behalf. It is ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
187
also possible for the shareholders to appoint as their proxy any person other than those on the list proposed by the Bank. In addition, the Bank makes an arrangement, through its website before the date of the annual general meeting, for the shareholders to exercise their right to propose names of persons to be appointed as directors or to propose agenda items or any matters related to the Bank’s business operations to be discussed at
the meeting. The established timeframe for such proposals is from 29 December 2008 to 27 January 2009. This represents another channel for facilitating communication between the Bank and the shareholders as well as investors in general. The shareholders’ opinions and suggestions would be forwarded to the unit concerned. To support the exercise of the right of local and foreign shareholders to attend the meeting, the Bank continues to pay attention to disclosure of accurate and adequate information, both in Thai and English, to the shareholders in a timely and transparent manner.
Annual General Meeting of the Shareholders
The Bank’s Board of Directors always pays great attention to the meetings of shareholders. Apart from informing all the shareholders of details related to the meeting well in advance, it makes arrangements to provide the shareholders with convenience in terms of easily accessible venue for the meeting, adequate supporting staff responsible for giving the shareholders reception and handling registration, tools and equipment used at the meeting, and printing of ballot papers for each agenda item. Importantly, the shareholders can make registration for attending the meeting over two hours in advance. They are also given ample opportunities to express their opinion and ask questions during the meeting. Their important questions and opinions will be recorded in the meeting’s minutes. To provide the shareholders with greater convenience, the Bank uses video presentations at the meeting, in addition to the supporting documents. Before commencing the shareholders’ meeting, the Bank also gives the shareholders clear clarifications on vote casting and counting procedures. During the course of the meeting, all the shareholders are given equitable treatment and an appropriate time to express their opinions and ask questions. Votes are cast and counted in a transparent and efficient manner. The Bank counts one share as one vote. Resolutions are adopted by a majority vote, with the exception of those resolutions which require at least two third or three fourth of the total votes of the shareholders who attend the meeting and are entitled to vote. In casting votes, the shareholders are required to use the ballot papers only when they wish to cast their votes against the resolution or wished to abstain from voting. These ballot papers will be kept for later verification. The Chairman and the management provide the shareholders with any information requested by the shareholders. As well, the Bank takes minutes of the meeting and records in detail the voting results of each agenda item as well as the related verbal discussions. The information is also made available to the shareholders through the Bank’s website. The Bank organized the 15th Annual General Meeting of Shareholders for 2008 on 23 April 2008 at Pathumwan Princess Hotel with the meeting being called to order at 15:00 hours. The shareholders could make registration for attending the meeting since 13:00 hours. When the meeting commenced, there were 64 shareholders and proxies, accounting for 1,733,341,978 shares or 99.93 percent of the 1,734,619,292 issued and paid-up shares. In line with the legal requirements and Thanachart Bank’s Articles of Association, the number exceeded the requirement to form a quorum as it was more than one third of the issued and paid-up share capital.
The members of the Board of Directors who attended the meeting were as follows: 1. Mr. Banterng Tantivit Chairman (Non-Executive Director) 2. Mr. Suphadej Poonpipat Vice Chairman, Chairman of the Executive Committee (Executive Director), and Chief Executive Officer 3. Mr. Kiettisak Meecharoen Chairman of the Audit Committee (Independent Director) 4. Mr. Narong Chivangkur Chairman of the Nomination Committee and Chairman of the Remuneration Committee (Independent Director) 5. Mr. Suvit Arunanondchai Member of the Audit Committee and Member of the Nomination Committee (Independent Director) 6. Mr. Sathaporn Jinachitra Member of the Audit Committee (Independent Director)
188
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
7. Ms. Suvarnapha Suvarnaprathip Vice Chairperson of the Executive Committee (Executive Director) 8. Mr. Vichit Yarnamorn Member of the Nomination Committee, Member of the Remuneration Committee (Non-Executive Director), and Information & Technology System Advisor 9. Mrs. Michele Kwok Director (Non-Executive Director) 10. Mr. Brendan King Member of the Remuneration Committee and Member of the Executive Committee (Non-Executive Director) Thanachart Bank held the Extraordinary Meeting of Shareholders No. 1/2009 on 8 January 2009
at Pathumwan Princess Hotel with the meeting being called to order at 14:00 hours. The shareholders could
make registration for attending the meeting since 12:00 hours. When the meeting commenced, there were
76 shareholders and proxies, accounting for 1,733,525,505 shares or 99.94 percent of the issued and paid-up share capital which is in the amount of 1,734,619,292 shares. In line with the legal requirements and Thanachart Bank’s Articles of Association, the number exceeded the requirement to form a quorum as it was more than one third of the issued and paid-up share capital. The members of the Board of Directors who attended the meeting were as follows: 1. Mr. Banterng Tantivit Chairman (Non-Executive Director) 2. Mr. Suphadej Poonpipat Vice Chairman, Chairman of the Executive Committee (Executive Director), and Chief Executive Officer 3. Mr. Kiettisak Meecharoen Chairman of the Audit Committee (Independent Director) 4. Mr. Narong Chivangkur Chairman of the Nomination Committee and Chairman of the Remuneration Committee (Independent Director) 5. Mr. Suvit Arunanondchai Member of the Audit Committee and Member of the Nomination Committee (Independent Director) 6. Mr. Sathaporn Jinachitra Member of the Audit Committee (Independent Director) 7. Ms. Suvarnapha Suvarnaprathip Vice Chairperson of the Executive Committee (Executive Director) 8. Mr. Vichit Yarnamorn Member of the Nomination Committee, Member of the Remuneration Committee (Non-Executive Director), and Information & Technology System Advisor Two members of the Board of Directors, namely Mrs. Michele Kwok who was Director (Non-Executive Director) and Mr. Brendan King who was member of the Remuneration Committee and member of the Executive Committee (Non-Executive Director) were unable to participate in the meeting as they had to attend to important matters.
Conflicts of Interest
To prevent conflicts of interest, Thanachart Bank’s Board of Directors acts prudently when there are any transactions that may have conflicts of interest. The Board has established a policy and approval procedures related to conflicts of interest. The policy and approval procedures are put in writing with all details disclosed to all the parties concerned. The Board has also established a policy and measures aimed at preventing executives and related parties from making use of inside information for personal benefit. The policy includes the following. • When there is a transaction which may have a conflict of interest, a connected transaction or an
affiliated transaction of any parties that are related, the matter will be sent to the Compliance Department for giving legal points of view and practice guidelines before forwarding them to the person who has the power to consider and approve the matter. • The announcements of various committees stipulate that, in any transaction from which the director, executive or related party gets benefit, the director or the executive is required to disclose the information on the vested interest in connection with the transaction. In addition, the director or the executive with the vested interest is prohibited from attending the meeting which considers the agenda item related to the transaction. • In approving a loan application or an investment project from which the Bank, its director or high-level executive gains benefit, or in approving a loan application of the Bank’s major shareholder or high-level executive, the related transaction can be executed only after it receives unanimous approval from the Board of Directors, with neither the director nor the high-level executive with the vested interest participating in the ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
189
consideration and approval of the loan application or the investment project. • When the Bank’s Board of Directors is aware of any transaction which may have a conflict of interest or of any connected transaction, the Board will consider the transaction in a prudent manner and comply with the rules and regulations established by the SET, the Office of the Securities and Exchange Commission (SEC) and the Bank of Thailand (BOT). • The information disclosure of transactions which may have conflicts of interest or connected transactions or affiliated transactions has to comply with the rules and regulations established by the authorities concerned. • All related transactions will be verified in line with the annual audit plan, the report of which will be presented to the Audit Committee. • The information about business relationships or businesses in which members of the Board or the top management are involved has to be disclosed quarterly. This information will be used to monitor and control transactions which may have conflicts of interest. It will also serve as a database of names, from which the Bank can obtain lists of transactions with the related businesses, which will be disclosed in the notes to the financial statements. Supervision of Use of Inside Information • The Bank requires all its work units to organize an appropriate system for keeping and controlling the use of the inside information in a proper manner. • In compliance with Section 59 of the Securities and Exchange Act B.E. 2535, executives at the level of Executive Vice President or higher as well as members of the Board of Directors are required to make a report showing changes in their securities holdings to the SEC. • As stipulated in Thanachart Bank’s announcements as well as its code of conduct, the Board of Directors, executives, employees or advisors who have the inside information that is not yet disclosed to the public are prohibited from seeking any benefit from the inside information for their own interest or for the interest of others. • There are announcements which govern the securities trading and control the abusive use of inside
information. It is required that all directors and members of the management teams are prohibited to trade
Thanachart Capital shares during 15 days before the closing date of each quarter up until 2 days after the
disclosure of the financial statements. • In an event when there is a use of the inside information for one’s own interest, it will be considered as violation of the established policy on the use of inside information. The party concerned will be subject to the judgment of the Disciplinary Committee. 2. Roles of Stakeholders Thanachart Bank respects the rights of every group of stakeholders, regardless of whether they are internal stakeholders or not. The internal stakeholders include shareholders, staff, executives and the Board of Directors of Thanachart Bank and other member companies of Thanachart Group. The external stakeholders include customers, trading partners, lenders, competitors, the public sector, as well as society in general and the environment. Adhering to the business ethics and the code of conduct, Thanachart Bank conducts its business affairs in a transparent manner within the competition framework as well as business terms and conditions that are generally accepted. To ensure that the stakeholders will receive appropriate rights, the Bank has established practice guidelines in writing in its Business Ethics and the Codes of Conduct for directors, executives and staff. The information is disseminated through the Bank’s internal communications channels
so that the Board of Directors, executives, and staff at all levels will strictly adhere to the guidelines.
The information is also publicized through the Bank’s website. The purpose is to make the stakeholders concerned feel confident that their rights are always taken care of. The details related to the treatment of
the various groups of stakeholders are as follows:
Shareholders
Thanachart Group is determined to manage its business operations, with an aim to achieve a strong performance and a sustainable growth as well as being competitive. The objective is to give an appropriate return to shareholders on a regular basis. In managing the business operations, the Bank takes into 190
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
consideration risks, efficient internal control systems, and disclosure of information in an accurate, complete, timely and transparent manner. Importantly, the Bank makes arrangements to provide the shareholders with convenience in exercising any of the rights they are entitled to.
Employees
The Bank treats their employees equitably and fairly, as well as ensuring that they will be compensated appropriately. As guidelines in adjusting staff salaries, the Bank conducts surveys and takes into consideration the inflation rates, the consumer price index, and the Key Performance Indicators (KPIs). In 2008, the Bank introduced performance evaluation of Thanachart Group’s staff, which was based on five core competencies including: (1) customer-centric competency, (2) cognitive competency, (3) operational excellence competency, (4) managerial competency, and (5) leadership competency. Being in line with Thanachart Group’s key business strategies (or CEO’s Six-point Agenda), the Key Performence Indiectors (KPIs) will be used to measure staff efficiency and to award compensation. The Indicators will also be used to enhance staff performance and to promote staff to higher level positions in a fair and timely manner. The Bank also provides its staff with other welfare benefits including medical expense benefits, annual leave, provident fund, savings cooperatives for Thanachart Group’s staff, fire drills, upkeep of workplace environment, security for life and belongings.
The Bank also organizes activities with an aim to promote good relationship among staff of Thanachart Group by publishing and circulating monthly magazines entitled “Tor Saiyai.” Through its Intranet system, the Bank also circulates news and information about Thanachart Group’s products and services, announcements/internal regulations, the related external rules and regulations, as well as activities of Thanachart Group. As regards to human resource development, in 2008 the Bank implemented its 2nd year “Go Together” Project. As part of the related activities, the Chief Executive Officer as well as high-level executives of Thanachart Bank paid visits to all the hubs nationwide to meet with the managers and staff of the branch network and to provide them with policies that were in line with the CEO’s Six-point Agenda adopted by Thanachart Group. The management recognized that Thanachart Group’s staff played a crucial role in making the Group an organization with good corporate governance and social responsibility. As a result, the management commissioned The Continuing Education Center of Chulalongkorn University to develop
a curriculum entitled “Corporate Governance and Corporate Social Responsibility Strategy Application”.
The related knowledge would be imparted to staff at all levels, both in Bangkok and the upcountry regions. Tests would also be given to the participating staff before and after the training, to measure their knowledge base on corporate governance and corporate social responsibility. In 2008, 10 groups of staff were trained.
The Project would continue to be implemented in the future.
Customers
The Bank is determined to develop products and services that cater to all financial needs of
the customers. The appropriate fees are charged on the customers and provide the customers with complete information about the products and services before the customers make their decision. The Bank receives suggestions and complaints about its products and services through various channels such as the Bank’s website (www.thanachartbank.co.th), marketing staff, and Thanachart Contact Center (1770). The Bank has also established a special unit responsible for following up the customers’ complaints and giving feedback to every customer who lodges the complaint. In this connection, a monthly report will be sent to Thanachart Bank’s Board of Directors for information. The customers’ suggestions and complaints will be used for improving Thanachart Group’s services in order to satisfy the customers’ needs when they use the services next time.
Trading Partners and Lenders
The Bank maintains the positive reputation of Thanachart Group in business dealings with its trading partners and lenders. This starts from the selection process to the fulfillment of obligations as well as the observation of the conditions which are mutually agreed upon. This includes fostering of good relationship with an aim of building confidence for long-term cooperation.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
191
Competitors
The Bank conducts its business affairs within rules and regulations under fair competition. It does not slander its competitor. Nor does it hit its competitor when it is down. As well, it does not seek confidential information of the competitor in a dishonest or inappropriate manner. Society and Environment The Bank recognizes the importance of good custom and tradition as well as laws and rules for the purpose of maintaining and rehabilitating the society and the environment. Operating its business responsibly, the Bank also participates in and organizes activities which benefit the society and the environment. government SECTOR In its conduct of business affairs, the Bank considers it very important to observe the laws and to comply with the rules and regulations established by the authorities. The Bank will not join or do business with organizations or persons violating the laws. 3. Information Disclosure and Transparency Corporate Governance Policy, Business Ethics and Codes of Conduct for Directors, EXECUTIVES AND STAFF Thanachart Bank’s Board of Directors has established a policy on corporate governance, which covers key principles about the structure, roles and responsibilities of the Board of Directors, and the determination to manage business in a transparent, open and accountable manner. The information is disseminated through
the Bank’s website (www.thanachartbank.co.th) and Thanachart Group’s Intranet system. This will enable
all staff of Thanachart Group at all levels to have easy access to the information and study the related details. The key objective is to send a message to Thanachart Group’s staff, shareholders and other stakeholders
about the Board of Directors’ strong determination to comply with the key components of the good corporate governance process, which include the following: 1.1 Honesty, 1.2 Transparency, 1.3 Independence, 1.4 Fairness, 1.5 Accountability, and 1.6 Social Responsibility. The above key components of the good corporate governance process are included in the Bank’s corporate governance policy which is communicated to the staff at all levels. It integrates missions, the values it expects to have, vision and business ethics, as well as the code of conduct of the Board of Directors, executives and staff together. The policy reflects the value systems, guidelines and direction of its business operations, which ensure Thanachart Group’s compliance with the principles of good corporate governance for listed companies. Every member of the Bank’s Board of Directors recognizes the importance of their responsibility in managing the business for the maximum benefits. The Bank’s Board of Directors also places strong emphasis on disclosure of information, both financial and non-financial, in an accurate, complete, timely and transparent manner through channels which are easily accessible, equitable and reliable to all groups of the stakeholders. Moreover, the Bank is also committed to manage its business in a manner that shows its responsibility to
the society as a whole and the environment. Thanachart Group and its staff are committed to behave themselves as good citizens by wisely using assets that include financial capital, human resources and energy. Thanachart Group and its staff regularly participate in organizing activities which promote environmental protection as well as social and community development. They fully recognize the importance of their responsibility towards the life quality development of communities and support for folk wisdom. Thanachart Group encourages its staff to participate in various activities related to society, education, arts, culture and
192
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
environment to a certain extent as deemed appropriate. The principles of Thanachart Bank’s good corporate governance also encompass the structure of the Board of Directors, the composition of the Board of Directors, roles and responsibilities of the Board of Directors and various committees. They also cover risk management and internal control, staff’s code of conduct, the policy governing the use of inside information, and guidelines on course of action in the event of conflict of interest. The information is made available through Thanachart Group’s Intranet system to enable all staff of Thanachart Group at all levels to have easy access to the information and study the related details. In addition to the announcements and implementation of its policy on good corporate governance which was disseminated to the staff at all levels since 2003, Thanachart Group continues developing and improving its business operations within the framework of good corporate governance. It has also come up with a plan to improve its corporate governance policy which will be subject to an annual review. The review will also cover improvement of the business ethics as well as the codes of conduct for directors, executives and staff, which will serve as practice guidelines for the personnel concerned. In addition, Thanachart Group has established a programme aimed at making Thanachart Group’s staff recognize the importance of doing businesses with adherence to principles of righteousness, business ethics, and the principles of good corporate governance. The Group has also established projects which aim to give back to communities and environment in which the hubs are located. Reports of the Board of Directors Thanachart Bank’s Board of Directors is directly responsible for the financial statements of the Bank.
In this regard, it has assigned the Audit Committee to be responsible for making sure that the financial statements and internal audit reports are reliable and accurately reflect actual performances and that they meet acceptable accounting standards in Thailand. The Board of Directors decides on the appropriate accounting policy to be implemented, and ensures that it is complied consistently. As well, it ensures disclosure of adequate information in the notes to the Bank’s financial statements. In addition to the quarterly and yearly financial statements, the Board of Directors submits the management discussion and analysis (MD&A) of
the business performance, a practice of which has started since the accounting period for the first half of
the year ended 30 June 2003. Thanachart Bank has also included the Report of the Audit Committee in this Annual Report. Roles and Responsibilities of the Board of Directors Thanachart Bank’s Board of Directors is responsible for looking after and managing all the Bank’s business affairs, in compliance with the laws, the Bank’s objectives, the Bank’s Articles of Association, as well as the resolutions adopted at the meetings of the shareholders. In this regard, the Board of Directors has appointed a number of committees responsible for management of the business operations in different areas with the aim of protecting the benefits of all groups of stakeholders concerned. The details about the roles of the Board of Directors and each committee, the number of meetings held by each committee as well as the number of meetings attended by each director in 2008 are already disclosed in this Annual Report. Control Systems and Internal Audit Thanachart Bank places strong emphasis on efficient internal control systems both at the management and frontline levels. As a result, it has defined the duties and responsibilities as well as the scope of authority of the operating staff concerned and the executives clearly in writing. The Bank attempts to ensure that its assets are properly controlled and used. Moreover, in order to have a system of check and balance, the Bank separates the duties of staff who work at the frontline level, from the duties of staff responsible for controlling and for evaluating the performance. As well, the Bank has put in place the internal control mechanism for financial systems by establishing a system of deliver financial reports to heads of the units concerned. It has also established the Compliance Department responsible for monitoring the business operations, ensuring that they are in compliance with legal requirements.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
193
The Internal Audit Group is responsible for performing audits and ensuring that the key business operations as well as the key financial activities are efficient and in line with the established direction.
The Internal Audit Group is also responsible for ensuring that the conduct of business affairs comply with
the related laws and requirements. To make the Internal Audit Group independent and enable it to fully carry out the auditing duties as well as serving as part of the check and balance system, the Board of Directors requires that the Internal Audit Group reports directly to the Audit Committee. The Internal Audit Group is responsible for submitting its quarterly audit report directly to the Audit Committee. The performance of
the Internal Audit Group will be evaluated by the Audit Committee. Risk Management Thanachart Bank places great emphasis on risk management, particularly the key risks of the Bank and the member companies of Thanachart Group, which have a direct impact on the established goals.
These risks include strategic risk, credit risk, market risk, interest rate and exchange rate risks, liquidity risk, and operational risk. As a result, the Board of Directors has established a special work unit responsible
for overseeing the risks, giving guidelines on risk management, as well as controlling and monitoring the risks.
As well, the Board requires that the risk reports are submitted regularly. The related details are given under
the subject of Risk Management and Risk Factors. Investor Relations Thanachart Bank’s Board of Directors recognizes that the Bank’s financial and non-financial information are influential factors to the decision making of the investors and stakeholders of the Bank. As a result, the Board of Directors has requested the management to ensure the disclosure of accurate, complete, timely, transparent, reliable, and factual information to the investors and stakeholders. In response, the management has always complied with the request. As regards the investor relations, the Bank has not yet established a special unit responsible for the work, due to marginal amount of the activities. However, the Bank has assigned the Managing Director Office to function as investor relations and be a contact point with all institutional investors, shareholders as well as financial analysts and the state agencies concerned. Moreover, the investors can access to Thanachart Bank’s information through its website, www.thanachartbank.co.th.
or they may contact the Managing Director Office to get the information by phoning +66 (0) 2613-6107. 4. Responsibilities of the Board of Directors Thanachart Bank is determined to add value to the business in order to enhance its competitiveness.
It also develops the Bank’s businesses, aiming to be able to offer a wide range of financial products which cater to the needs of customers in an integrated manner. Members of the Board of Directors who are well qualified and have extensive knowledge and experiences in various fields that support the business operations have jointly established visions, missions, strategies, and business targets as well as budgets in a prudent manner. The Bank’s Board of Directors holds such meeting to monitor the estimated plans and budgets regularly.
The Board also ensures that the management operates businesses in line with the established business plans and budgets in an efficient manner by taking into consideration the best interest of Thanachart Bank and
all the stakeholders concerned. Thanachart Bank’s Board of Directors has put in place a control system as well as an adequate internal audit in compliance with the rules and regulations of the authorities concerned. It has also put in place appropriate risk management measures which are in line with the visions, missions, business ethics as well as the principles of good corporate governance. As well, it closely monitors the implementation of these measures on a regular basis. The Board of Directors holds at least 12 meetings annually. Thanachart Bank’s Board of Directors is responsible for determining and dividing duties and responsibilities among the Bank’s Board of Directors, various committees, and the management by putting those duties and responsibilities in writing. As well, the Board of Directors determines the level of authority for approval and decision making, the details of which are also put in writing. In this connection, copies of the power of attorney are circulated to the parties concerned, both inside and outside the organization, for
194
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
information. As well, the Board of Directors regularly reviews the scope of delegated authority, ensuring that they are appropriate and that it achieves maximum efficiency in actual practice. The internal parties concerned can also check the above information through the Intranet system any time they need. The Chairman of the Board of Directors shall not be the same person as the Chief Executive Officer. The objective is to separate the duties of developing policies from the duties of managing the day-to-day business operations. Constituent of Thanachart Bank’s Board of Directors Thanachart Bank’s Board of Directors is composed of independent directors, executive directors and non-executive directors who are well qualified and have expertise, skills as well as experience in finance, accounting, management and other professional areas. As a result, the Board of Directors is able to manage business effectively, and thus, provides Thanachart Bank with great benefits. The election of directors at the shareholders’ meeting is in compliance with the legal requirements as well as Thanachart Bank’s Articles of Association, with the constituent of the Board of Directors being in line with the BOT’s Notification dated
31 December 2008 on corporate governance of finance institutions. The Bank’s Board of Directors is composed of 10 members as follows: • 2 executive directors, • 4 non-executive directors, and • 4 independent directors. The directors who represent the major shareholders are as follows: 1. Thanachart Capital Public Company Limited holding 50.92 percent of the issued and paid-up capital on 3 February 2009 is represented by three directors as follows: 1.1 Mr. Banterng Tantivit, Chairman of the Bank’s Board of Directors (Non-executive Director),
who is not the same person as the Chief Executive Officer, in order to separate the duties of developing policies from the duties of managing the day-to-day business operations. 1.2 Mr. Suphadej Poonpipat, Vice Chairman of the Board of Directors, Chairman of the Executive Committee (Executive Director) and Chief Executive Officer. 1.3 Ms. Suvarnapha Suvarnaprathip, Director and Vice Chairperson of the Executive Committee (Executive Director). 2. The Bank of Nova Scotia “Scotiabank” holding 48.99 percent of Thanachart Bank’s issued and paid-up capital on 3 February 2009 is represented by two directors as follows: 2.1 Mrs. Michele Kwok, Director (Non-executive Director), and 2.2 Mr. Brendan King, Member of the Remuneration Committee and Member of the Executive Committee (Non-executive Director) Thanachart Bank’s authorized signatories include Mr. Banterng Tantivit, Mr. Suphadej Poonpipat,
and Ms. Suvarnapha Suvarnaprathip. Any two out of the three authorized signatories can jointly sign with Thanachart Bank’s seal affixed. Tenure of Directorship The tenure of directorship of the Board of Directors has been covered clearly by Thanachart Bank’s Articles of Association, which also specifies the minimum of at least 5 directors in the Board but does not specify the maximum number. At each annual general meeting of shareholders of Thanachart Bank,
all members of the Board of Directors must retire. However, the retiring members will continue performing necessary duties of the Board of Directors until the newly elected Board of Directors assume their duties. If a directorship becomes vacant for any reason other than by rotation, the Board of Directors shall elect a person, who is qualified and has no prohibitive characteristics prescribed by the law as director to fill the vacancy at the subsequent meeting of the Board of Directors, unless the remaining tenure of the vacant directorship is
less than the minimum period required by the law. The election of the director shall be supported by a vote
of not less than three-fourths of the remaining directors. At the 2008 Annual General Meeting of
Shareholders, the retiring Board of Directors was re-elected for another term. ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
195
Election of the Board of Directors The Board of Directors is elected at the shareholders’ annual general meeting, with candidates proposed by Thanachart Bank’s Board of Directors and minority shareholders entitled to elect members of the Board of Directors. The election of the Board of Directors is subject to the following rules and procedures: 1. Each shareholder shall have a number of votes equal to the number of shares held multiplied by the number of directors to be elected (cumulative votes). 2. Each shareholder may exercise all the votes he or she has under Item 1 to elect one or several persons as director or directors. If the shareholder elects several persons as directors, he or she may allot his or her votes to any person in any number. 3. The persons receiving respective votes from the highest votes downwards shall be the elected directors equal to the number of directors permitted or to be then elected. In the event that the elected directors in the lower order have equal votes and the number is in excess of the number permitted or to be then elected, the decisive criteria will be by draw until the number of the elected directors is equal to the number permitted
or to be then elected. 4. In addition to retirement by rotation, a director shall be retired upon 4.1 Death, 4.2 Resignation by submitting a resignation letter to the Bank or the Board of Directors of the Bank, 4.3 Disqualification or being forbidden under the law, 4.4 Removal by a resolution passed at the shareholders’ meeting by a vote of not less than
three fourth of the shareholders attending the meeting and having the rights to vote and having shares collectively at not less than half of the number of shares held by shareholders attending the meeting and having the voting rights, or 4.5 Retirement by order of the Court. 5. If a directorship becomes vacant for any reason other than by rotation, the Board of Directors shall elect a person, who is qualified and has no prohibitive characteristics prescribed by the law as director to fill the vacancy at the subsequent meeting of the Board of Directors, unless the remaining tenure of the vacant directorship is less than the minimum period required by the law. The election of the director shall be supported by a vote of not less than three-fourths of the remaining directors. 6. In the event that the vacant directorships cause the number of the remaining directors to be
less than a quorum, the remaining directors can act on behalf of the Board of Directors only in holding
a meeting of shareholders to elect directors to fill the vacant directorships. 7. The director who is elected in Item 5 or Item 6 shall holds office for the remaining tenure of the director whom he or she replaces. As regards the tenure of members of other committees including the Audit Committee, the Nomination Committee, and the Remuneration Committee, they have the same tenure as the Board of Directors. Thanachart Bank’s Board of Directors Thanachart Bank’s Board of Directors consists of 10 members who are well qualified and have knowledge, skills and experience useful for the Bank’s businesses. As of 31 December 2008, the names
of the Board members were as follows: 1. Mr. Banterng Tantivit Chairman (Non-Executive Director) 2. Mr. Suphadej Poonpipat Vice Chairman (Executive Director) 3. Mr. Kiettisak Meecharoen Director (Independent Director) 4. Mr. Narong Chivangkur Director (Independent Director) 5. Mr. Suvit Arunanondchai Director (Independent Director) 6. Mr. Sathaporn Jinachitra Director (Independent Director) 7. Ms. Suvarnapha Suvarnaprathip Director (Executive Director) 8. Mr. Vichit Yarnamorn Director (Non-Executive Director) 9. Mrs. Michele Kwok Director (Non-Executive Director) 10. Mr. Brendan King Director (Non-Executive Director) Mr. Panupan Tuangthong Acting as secretary of the Board of Directors
196
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Each member of Thanachart Bank’s Board of Directors attended at least one training course organized by the Thai Institute of Directors (IOD). In 2008, one director who attended an additional course organized by IOD was: Mr. Narong Chivangkur Chairman of the Nomination Committee, and Chairman of the Remuneration Committee (Independent Director) Certificate: Successful Formulation & Execution the Strategy (SFE) Class 2/2008 Election of directors at the meeting of the Board of Directors or at the meeting of the shareholders
Name List
1. Mr. Banterng Tantivit 2. Mr. Suphadej Poonpipat 3. Mr. Kiettisak Meecharoen 4. Mr. Narong Chivangkur 5. Mr. Suvit Arunanondchai 6. Mr. Sathaporn Jinachitra 7. Ms. Suvarnapha Suvarnaprathip 8. Mr. Vichit Yarnamorn 9. Mrs. Michele Kwok 10. Mr. Brendan King
Date on which the director was elected at the meeting of the Board of Directors
Date on which the director was elected at the meeting of the shareholders
- - - - - - - - - -
23 April 2008 23 April 2008 23 April 2008 23 April 2008 23 April 2008 23 April 2008 23 April 2008 23 April 2008 23 April 2008 23 April 2008
Roles and Responsibilities of Thanachart Bank’s Board of Directors
1. The Board is responsible for ensuring that the conduct of all the business affairs of
Thanachart Bank is in compliance with legal requirements, the Bank’s objectives and Articles of Association,
as well as the resolutions adopted at the shareholders’ meetings. 2. The Board appoints the Executive Committee or the Sub-Committees to manage the work as assigned by the Bank’s Board. 3. The Board may assign or authorize one or more directors or other persons to take any action on the behalf of the Board. 4. The Board gives its approval for visions, missions, values that the Bank intends to achieve, and the business ethics. 5. The Board considers and discusses the strategies proposed by the management and gives its approval for key points related to the Bank’s direction and policies. As well, the Board considers and approves business plans, budgets, and operational goals proposed by the management. 6. The Board monitors the performance of the Bank’s business operations and the progress achieved in relation to the established objectives as well as the compliance with the related laws, regulations and policies. 7. The Board authorizes the President and the Chief Executive Officer to manage businesses of Thanachart Bank within the framework of the capital expenditure budgets and operating expense budgets approved for various projects. Moreover, the Bank’s Board of Directors shall consider for approval the loan applications which are beyond the delegated lending authority. 8. The Board ensures that the Bank has put in place effective internal control systems and appropriate risk management systems. 9. The Board ensures that both the internal auditor and the external auditor carry out their duties in an effective manner. 10. The Board approves quarterly and annual financial statements and ensures that the financial statements have been prepared in line with generally accepted accounting principles. 11. The Board ensures that the information about various matters is disseminated to the Bank’s stakeholders and the general public. In 2008, the Board of Directors held 13 meetings in total. ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
197
The Board of Directors Meetings Thanachart Bank’s Board of Directors holds its regular meeting during the last week of the month.
It may also hold additional meetings as deemed appropriate. The agenda of the meeting will be clearly determined in advance with the regular agenda items including monitoring of business performance,
risk management and approval of various transactions. The Secretary of the Board of Directors is responsible for sending all members of the Board notices of the meetings together with the agenda as well as supporting documents in advance so that the directors will have adequate time to study the information before attending the meetings. In 2008, the Board of Directors held 12 general meetings and one extraordinary meeting. At the Board of Directors meeting, every director independently expresses their opinions and adopts resolutions. The Chairman of the Board of Directors shall give opportunities to all directors to express their opinions before requesting for the adoption of the resolution. The observations and opinions of the directors at all meetings are recorded in writing. The minutes of the meetings approved by the Board of Directors are properly kept and ready for examination by the Board and the parties concerned. Audit Committee Thanachart Bank’s Board of Directors approved the establishment of the Audit Committee on
3 December 1999. In line with the policy of the authorities concerned, the objective is to ensure that Thanachart Bank’s business operations are efficient and adhere to the principles of good corporate governance. The accomplishment of the objective will help gain the Bank’s credibility with the public. The Audit Committee consists of three directors, all of whom are independent. At least one of the directors must have knowledge, understanding, or experience in the field of accounting or finance. As of 31 December 2008, the names of the members of the Audit Committee were as follows: 1. Mr. Kiettisak Meecharoen Chairman of the Audit Committee (Independent Director) 2. Mr. Suvit Arunanondchai Member of the Audit Committee (Independent Director) 3. Mr. Sathaporn Jinachitra Member of the Audit Committee (Independent Director) Mr. Chatchawal Jantararuangtong Secretary of the Audit Committee Mr. Chusak Patcharapongsak Assistant Secretary of the Audit Committee Roles and Responsibilities of the Audit Committee 1. To review the process related to the preparation and information disclosure of Thanachart Bank’s financial statements, ensuring that the information is complete and reliable. In reviewing the process, the Audit Committee will coordinate with the external auditor and the executives responsible for preparing both quarterly and annual financial statements. 2. To review internal control systems, internal audits, and corporate governance, ensuring that they are appropriate and efficient. In reviewing them, the Audit Committee will work with the external auditor, the internal auditor, and the regulating authorities concerned. 3. To review Thanachart Bank’s risk management, ensuring that it is adequate and in line with
the Bank’s policy as well as the guidelines given by BOT. 4. To review evidences from internal investigations when there is an observation or inference that there might be fraud, irregularities or substantial loopholes in the Bank’s internal control systems and to report
them to Thanachart Bank’s Board of Directors for further consideration. 5. To review related party transactions as well as transactions which may lead to a conflict of interest, ensuring that they are executed correctly and accurately. 6. To review the Bank’s business operations, ensuring that they are in compliance with the rules
and regulations of the authorities concerned. 7. To consider the audit reports and recommendations presented by the external auditor and internal auditor and to monitor the implementation of the recommendations. 8. To select and propose for appointment of Thanachart Bank’s external auditor and also to consider the audit fees, taking into account the auditor’s creditability, the adequacy of its resources, audit workload of
the auditor as well as experience of the staff assigned to audit the Bank’s accounts. 9. To approve of the appointment, evaluation, removal, transfer or dismissal of the Head of the Internal Audit Group.
198
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
10. To ensure that the business operations of the subsidiaries are in compliance with Thanachart Group’s policies. The Internal Audit Group has been given the following assignments: 10.1 To submit to Thanachart Bank’s Audit Committee for information an overall report covering the performance results from the Internal Audit Group’s audits on the subsidiaries. 10.2 To submit to Thanachart Capital’s Board of Directors for information an overall report covering the performance results from the Internal Audit Group’s audits on Thanachart Bank and
the subsidiaries. 10.3 In carrying out the duties specified in Items 10.1 and 10.2, in the event that there are key issues such as violation of law, fraud, or matters that have a serious impact on the financial statements, status or image of Thanachart Bank and its subsidiaries, the Internal Audit Group is required to report in detail. 11. To hold meetings with Audit Committees of other member companies of Thanachart Group occasionally as deemed necessary. 12. To perform any other duties as assigned by Thanachart Bank’s Board of Directors or by the SET
or in compliance with other related legal requirements. In 2008, the Audit Committee held 10 meetings, each of which was attended by all members of
the Committee. The minutes of the meetings were submitted to Thanachart Bank’s Board of Directors. Nomination Committee The Bank’s Board of Directors approved the establishment of the Nomination Committee on 26 March 2002. As of 31 December 2008, the Nomination Committee consisted of two independent directors and one non-executive director with the names of the members of the Nomination Committee as follows: 1. Mr. Narong Chivangkur Chairman of the Nomination Committee (Independent Director) 2. Mr. Vichit Yarnamorn Member of the Nomination Committee (Non-Executive Director) 3. Mr. Suvit Arunanondchai Member of the Nomination Committee (Independent Director) Mr. Panupan Tuangthong Acting as Secretary of the Nomination Committee Roles and Responsibilities of the Nomination Committee 1. To establish guidelines and procedures for selecting candidates for the positions of directors and chief executive officer in case the positions become vacant. 2. To select and screen the candidates with appropriate qualifications for appointment as director or chief executive officer. To propose the selected candidates to the Bank’s Board of Directors for consideration. 3. To ensure that the size and constituent of Thanachart Bank’s Board of Directors are appropriate and suitable to the organization as well as making necessary changes to suit the changing environment. The Board of Directors consists of members with appropriate knowledge, competency and experience in different areas. In 2008, the Nomination Committee held three meetings, the minutes of which were submitted to Thanachart Bank’s Board of Directors. Remuneration Committee Thanachart Bank’s Board of Directors appointed the Remuneration Committee on 26 March 2002.
As of 31 December 2008 the Committee consisted of one independent director and two non-executive directors with the names of the members of the Remuneration Committee as follows: 1. Mr. Narong Chivangkur Chairman of the Remuneration Committee (Independent Director) 2. Mr. Vichit Yarnamorn Member of the Remuneration Committee (Non-Executive Director) 3. Mr. Brendan King Member of the Remuneration Committee (Non-Executive Director) Mrs. Yuwapa Ngernsawat Secretary of the Remuneration Committee ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
199
Roles and Responsibilities of the Remuneration Committee 1. To determine a structure of remuneration packages and fringe benefits for directors and
Chief Executive Officer. And to propose the remunerate packages and fringe benefits to Thanachart Bank’s Board of Directors for consideration and approval. 2. To review the remuneration packages and fringe benefits for directors and Chief Executive Officer, ensuring that the remuneration packages and fringe benefits are compatible with their respective duties and level of responsibility towards Thanachart Bank. And to propose the reviewed remuneration packages and
fringe benefits to Thanachart Bank’s Board of Directors or shareholders at their meetings for approval, depending on the case. In 2008, the Remuneration Committee held three meetings, the minutes of which were submitted to Thanachart Bank’s Board of Directors. Corporate Governance Committee Thanachart Bank’s Board of Directors also serves as the Corporate Governance Committee, which has duties and responsibilities as follows: 1. To establish procedures and guidelines on effective and appropriate corporate governance for Thanachart Bank. 2. To promote preparation of a code of business ethics as well as a code of conduct for executives
and staff of Thanachart Group so that the codes could serve as guidelines for the personnel concerned. 3. To monitor and ensure the adherence to Thanachart Bank’s principles of good corporate governance in practice. 4. To disseminate information about Thanachart Bank’s good corporate governance to the authorities concerned and to disclose the information in Thanachart Bank’s annual reports. Executive Committee Thanachart’s Bank’s Board of Directors established the Executive Committee on 26 March 2002.
The Executive Committee consists of three members. As of 31 December 2008, the names of the members of the Executive Committee were as follows: 1. Mr. Suphadej Poonpipat Chairman of the Executive Committee 2. Ms. Suvarnapha Suvarnaprathip Vice Chairperson of the Executive Committee 3. Mr. Brendan King Member of the Executive Committee Person assigned by the Chairman Secretary of the Executive Committee of the Executive Committee Roles and Responsibilities of the Executive Committee 1. Authorized to approve lines of credit for the benefit of Thanachart Bank as well as approving debt restructuring in compliance with the Financial Institution Business Act as well as the rules and regulations of
the BOT. 2. Authorized to approve investments aimed at generating earnings for Thanachart Bank in compliance with the Financial Institutions Businesses Act as well as the rules and regulations of the BOT. 3. To manage business operations in line with Thanachart Bank’s business objectives as well as managing liquidity, risks and the interest rate structure. 4. Authorized to make purchases, take transfers, and dispose of Thanachart Bank’s assets in
an amount up to 5 percent of Thanachart Bank’s share capital. 5. To consider and screen matters which are beyond the authority of the Executive Committee, and to present them to those having higher authority for consideration. 6. Authorized to restructure and manage the organization, to establish rules and regulations related to work process, to appoint and remove employees, to appoint advisers, as well as directing and governing
the conduct of Thanachart Bank’s business affairs. 7. Authorized to approve salaries or other compensation benefits for employees and advisers to support Thanachart Bank’s normal business operations. 8. To consider and approve appointments of independent appraisers. 200
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
9. To establish expense budgets for appraising value of the collateral as well as controlling the related expenses. 10. Authorized to delegate its authority to other staff of Thanachart Bank for the purpose of efficiency. The Executive Committee is authorized to approve lines of credit, investments, and obligations in compliance with the requirements imposed by the BOT. The authorized limit established by Thanachart Bank
is currently not more than 25 percent of the share capital. In 2008, the Executive Committee held 12 meetings, the minutes of which were submitted to Thanachart Bank’s Board of Directors. Risk Management Committee Thanachart Bank established the Risk Management Committee in 2002. The Risk Management Committee directly reported to the Executive Committee. However, in line with the resolution at the Meeting
No. 3/2008 of Thanachart Bank’s Board of Directors on 27 February 2008, the Risk Management Committee was required to directly report to the Board of Directors. The change was in compliance with the BOT’s notification on corporate governance structure. As of 31 December 2008, the names of the members of the Risk Management Committee were as follows: 1. Mr. Suphadej Poonpipat Chairman of the Risk Management Committee 2. Mr. Robert Erickson Vice Chairman of the Risk Management Committee 3. Mr. Bundit Cheevadhanarak Member of the Risk Management Committee 4. Mrs. Noossara Roonsamrarn Member of the Risk Management Committee 5. Mr. Piyaphong Artmangkorn Member of the Risk Management Committee 6. Dr. Sumas Wongsunopparat Member of the Risk Management Committee 7. Mrs. Sasima Taweeskulchai Member of the Risk Management Committee 8. Mr. Praphan Anupongongarch Member of the Risk Management Committee 9. Mrs. Kjitphan Chunharit Member of the Risk Management Committee 10. Mr. Kamtorn Tantisiriwat Member and Secretary of the Risk Management Committee Roles and Responsibilities of the Risk Management Committee 1. To propose a risk management policy that covers all of Thanachart Bank’s risk factors to the Board of Directors for consideration and approval. The policy must establish proper measures for monitoring and ensuring that the risk management policy is strictly adhered to. 2. To formulate risk management strategies, ensuring that they are in line with the risk management policy. The strategies focus on monitoring and assessing Thanachart Bank’s various risk factors, ensuring that the risks are at an appropriate level. 3. To review the adequacy of the risk management policy as well as the effectiveness of the risk management systems and the implementation of the established policy. 4. To establish risk management measures aimed at preventing possible damages and finding solutions to problems arising from the risks. 5. To assess both internal and external factors that may significantly affect the financial positions.
The results of the assessment will be used to revise Thanachart Bank’s overall risk management policy. 6. To request and instruct the work units under the Risk Management Committee to develop more efficient mechanisms in managing, controlling and monitoring the various risk factors. 7. To monitor and control the management of various risk factors by various committees and/or work units, ensuring that they adhere to the established policy. 8. To report to the Audit Committee regularly about areas which need improvements, ensuring that
the improvements are in line with the established risk management policy and strategies. In 2008, the Risk Management Committee held eight meetings, the minutes of which were submitted
to Thanachart Bank’s Board of Directors.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
201
Asset and Liability Management Committee The resolution of the Executive Committee on 18 December 2007 had made an adjustment of
the listed directors in the Asset and Liability Management Committee in order to manage the Bank’s assets and liabilities effectively and to be in line with the organizational structure. Currently, the committee consists of: 1. Mr. Suphadej Poonpipat Chairman of the Asset and Liability Management Committee 2. Ms. Suvarnapha Suvarnaprathip Vice Chairperson of the Asset and Liability Management Committee 3. Mr. Bundit Cheevadhanarak Member of the Asset and Liability Management Committee 4. Mrs. Noossara Roonsamrarn Member of the Asset and Liability Management Committee 5. Mr. Piyaphong Artmangkorn Member of the Asset and Liability Management Committee 6. Mr. Lalit Dharmaseri Member of the Asset and Liability Management Committee 7. Mr. Kobsak Duangdee Member of the Asset and Liability Management Committee Representative of the Business Secretary of the Asset and Liability Management Committee Control Department Roles and Responsibilities of the Asset and Liability Management Committee 1. To formulate risk management plans which cover Thanachart Bank’s liquidity, interest rates and foreign exchange rates, ensuring that the plans are in line with the policies established by the Executive Committee. 2. To manage Thanachart Bank’s liquidity and foreign exchange risks in line with trends and prevailing conditions in the money market and the capital market. 3. To manage Thanachart Bank’s interest rate structure and establish interest rates, both floating and fixed rates. The object is to prevent the adverse impacts resulting from the volatility of the interest rates. 4. To consider and approve investments in bonds within the limits specified by Thanachart Bank. 5. To report the performance related to the management of liquidity, interest rates and exchange rates to the Executive Committee. In 2008, the Asset and Liability Management Committee held 51 meetings in total. Directors’ attendance at meetings held in 2008
Risk
List of Thanachart Bank’s directors
Board of
Audit
Nomination
Remuneration
Management
Executive
Directors
Committee
Committee
Committee
Committee
Committee
(13 meetings)
(10 meetings)
(3 meetings)
(3 meetings)
(8 meetings)
(12 meetings)
Independent directors
1. Mr. Kiettisak 2. Mr. Narong 3. Mr. Suvit 4. Mr. Sathaporn
Meecharoen Chivangkur Arunanondchai Jinachitra
13/13 10/10 13/13 3/3 3/3 13/13 10/10 2/3 12/13 10/10
Non-executive directors
1. Mr. Banterng Tantivit 13/13 2. Mr. Vichit Yarnamorn 12/13 2/3 2/3 3. Mrs. Michele Kwok 8/13 4. Mr. Brendan King 11/13 9/12 Executive directors 1. Mr. Suphadej Poonpipat 13/13 8/8 12/12 2. Ms. Suvarnapha Suvarnaprathip
202
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
12/13
10/12
Investment Portfolio Committee The resolution of Thanachart Bank’s Board of Directors on 18 December 2007 brought about changes of the members of the Investment Portfolio Committee which were in line with the organizational structure.
The objective was to enhance the efficiency of Thanachart Bank’s investment. As of 31 December 2008,
the names of the members of the Investment Portfolio Committee were as follows: 1. Mr. Suphadej Poonpipat Chairman of the Investment Portfolio Committee 2. Ms. Suvarnapha Suvarnaprathip Vice Chairperson of the Investment Portfolio Committee 3. Mr. Piyaphong Artmangkorn Member of the Investment Portfolio Committee 4. Mr. Nophadon Ruengchinda Member of the Investment Portfolio Committee 5. Dr. Chartchai Parasuk Member of the Investment Portfolio Committee 6. Mr. Lalit Dharmaseri Member of the Investment Portfolio Committee Representative of the Business Secretary of the Investment Portfolio Committee Control Department Roles and Responsibilities of the Investment Portfolio Committee 1. To establish the investment policy as well as considering and approving investment plans. 2. To consider and approve investments within the authority specified by Thanachart Bank and in line with the established position limit and VaR limit. To also screen investment proposals that are beyond its authority and propose them for approval to the Executive Committee which has higher authority. 3. To review the investment performance and establish measures aimed at improving the investment performance. 4. To manage the market risk arising from changes in prices of investment vehicles. 5. To establish and revise the rate for making provisions or establishing allowances for the impairment in value of the invested securities. In 2008, the Investment Portfolio Committee held 17 meetings in total. Credit Committee The resolution of Thanachart Bank’s Board of Directors on 3 September 2007 brought about changes of the members of the Credit Committee which were in line with the organizational structure. The objective
was to enhance the efficiency of Thanachart Bank’s approval of loan applications. As of 31 December 2008,
the names of the members of the Credit Committee were as follows: 1. Mr. Suphadej Poonpipat Chairman of the Credit Committee 2. Ms. Suvarnapha Suvarnaprathip Vice Chairperson of the Credit Committee 3. Mr. Bundit Cheevadhanarak Member of the Credit Committee 4. Mrs. Noossara Roonsamrarn Member of the Credit Committee 5. Mr. Robert Erickson Member of the Credit Committee 6. Mr. Noel Singh Member of the Credit Committee Representative of the Business Secretary of the Credit Committee Control Department Roles and Responsibilities of the Credit Committee 1. To establish a work plan and govern credit approval procedures under the policy approved by Thanachart Bank’s Executive Committee or Board of Directors. 2. To establish covenants and conditions of credit lines and approve new credit lines as well as changing the conditions of credit lines within the level of delegated authority, taking into account the credit risk assessments within the limits specified by Thanachart Bank’s Executive Committee or Board of Directors. 3. To establish an authorization level of a person or group of persons in accordance with product conditions within the delegated authority of the Credit Committee.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
203
4. To approve transactions which exceed the authorization level of the Trouble Debt Restructuring Committee or other subsequently appointed committees which have similar duties of the above-mentioned committee. 5. To consider and screen loan applications which exceed the authorization level of the Credit Committee, to propose them to Thanachart Bank’s Executive Committee or Board of Directors for approval.
In case of urgency, the Credit Committee can propose the loan applications to the Executive Committee
or the Board of Directors without having to go through the screening process. 6. To report loan approval results to Thanachart Bank’s Executive Committee or Board of Directors. In 2008, the Credit Committee held 58 meetings in total. The Executive Committee has also established a number of committees to help consider and manage Thanachart Bank’s various affairs, ensuring that they are not only appropriate but also most effective and most efficient for the benefits of Thanachart Bank. These committees include the following: 1. Management Committee 2. Corporate Credit Committee 3. SMEs and Retails Credit Committee 4. Hire Purchase Management Committee 5. Hire Purchase Management Committee 6. IT Management Committee 7. Trouble Debt Restructuring Committee 8. Hire Purchase and Retail Loan Debt Restructuring Committee 9. Branch Channel Development Committee 10. Electronic Channel Development Committee 11. Product Development Committee 12. Investment Banking Committee 13. Bond Holder’s Representative Committee 14. Committee on Transactions Related to Custodians and Mutual Fund Supervisors 15. Repossessed Car Management Committee 16. Insurance, Car License Renewal and Car Repossessing Committee 17. Used Car Blue Book Committee 18. Foreclosed Asset Management Committee 19. Movable and Immovable Collateral 20. Operations Asset Management Committee Asset Appraisal Committee 21. Cash Management Committee 22. Accounting Committee 23. Committee on Managing 24. Committee on Compliance with International Thanachart Group’s Compliance Standards on Anti-Money Laundering and with International Standards Combating the Financing of Terrorism (AML/CFT) 25. Committee on Promotion of Knowledge 26. BASEL II Project Committee of Regulations and Rules of Bank and State Agencies 27. Business Support Committee 28. Corporate Communications Committee 29. Business Continuity Plan Committee 30. Corporate Social Responsibility Committee 31. Disciplinary Committee 32. Human Resource Management Committee 33. Compensation Committee Executives As 31 December 2008, Thanachart Bank’s executive at the management level and the following four executives after manager level according to the guidelines of the Office of the SEC included the following: 1. Mr. Suphadej Poonpipat Chief Executive Officer 2. Ms. Suvarnapha Suvarnaprathip Vice Chairperson of the Executive Committee 3. Mr. Bundit Cheevadhanarak Senior Executive Vice President 4. Mr. Piyaphong Artmangkorn Executive Vice President 5. Mrs. Noossara Roonsamrarn Executive Vice President 6. Dr. Sumas Wongsunopparat Executive Vice President (Chief Operating Officer) 7. Ms. Vilai Tantikun Senior Vice President, Accounting Group
204
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Chief Executive Officer With reference to the BOT Notification No. TorPorTor. ForKorTor. (21) 434/2006 dated 28 March 2006 approving the appointment of Mr. Suphadej Poonpipat as Chief Executive Officer Thanachart Bank’s
Board of Directors has determined the duties and authority of the Chief Executive Officer as follows: 1. To establish directions and formulate plans aimed at achieving goals in line with Thanachart Bank’s visions and missions. 2. To prepare business plans and budgets and propose them to Thanachart Bank’s Executive Committee and Board of Directors for consideration. 3. To manage and approve business transactions, as well as supervising Thanachart Bank’s executives and staff, ensuring that they follow the business plans and budgets approved by Thanachart Bank’s Executive Committee and Board of Directors. 4. To manage and approve matters related to Thanachart Bank’s organization structure and human resource management. 5. To report Thanachart Bank’s business performance to the Executive Committee or the Board
of Directors. As regards the level of approving authority, the Chief Executive Office is authorized to approve a credit line, investment or obligation worth not more than 300 million baht, provided that they are supported by collateral in the form of bonds, deposits or debt instruments. Apart from delegating the authority to the Chief Executive Officer to perform duties or act on behalf of Thanachart Bank as mentioned above, Thanachart Bank establishes guidelines and a table giving details related to use of authority in the conduct of business affairs within the Bank’s operations. The purpose is to delegate authority to staff in different positions with responsibilities and to enable them to perform their duties and make decisions on matters related to Thanachart Bank’s business affairs in an efficient and flexible manner within the framework of appropriate control systems. Company Secretary In line with its principles of good corporate governance and to make the management of its business operations more effective, Thanachart Bank has assigned the Managing Director Office to function as corporate secretariat. Roles and Responsibilities of the Company Secretary 1. To provide the Board of Directors with preliminary advice on laws, rules and regulations as well as the Articles of Association of Thanachart Bank, ensuring that they are always complied with properly and constantly. To also provide the Board of Directors with updates on such matters whenever there is a significant change that may affect the directors. 2. To organize annual general meetings of shareholders and meetings of the Board of Directors, ensuring that they are in compliance with legal requirements as well as the Articles of Association of
Thanachart Bank. 3. To take minutes of annual general meetings of shareholders and the meetings of the Board of Directors, as well as monitoring the implementation of the resolutions adopted at the shareholders’ meeting and the meetings of the Board of Directors. 4. To collect and organize director’s reiterative documents, letter of invitation for the Board of Directors meeting, the minutes of the Board of directors meeting, Thanachart Bank’s Annual Report, letter of invitation for the shareholders’ meeting and the minutes of the shareholders’ meeting. 5. To look after the disclosure of the information and various reports that need to be sent to
the authorities regulating Thanachart Bank in line with their requirements, including safe-keeping the report on the related-benefit transaction which is reported by director or executive. 6. To contact and communicate with shareholders in general, ensuring that they are kept informed of various rights and news about Thanachart Bank.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
205
7. To look after the activities of Thanachart Bank’s Board of Directors. 8. To support activities of Thanachart Bank’s Board of Directors.
Nomination and Election of Directors The nomination of directors has followed the guidelines and procedures set up by the Nomination Committee. The person to be selected will be proposed or screened by the Nomination Committee and then presented at the meeting of Thanachart Bank’s Board of Directors or at the meeting of shareholders, depending on the case. 1. Procedures of electing Thanachart Bank’s Board of Directors Thanachart Bank does not specify the maximum number of members of the directors. However,
its Articles of Association stipulate that there must be at least five directors. There are two different procedures related to the election of directors. The first procedure is concerned with electing a director to replace the one who retires by rotation. The second procedure is concerned with electing a director to fill in a vacant directorship. In this regard, Thanachart Bank’s Board of Directors established the Nomination Committee responsible for selecting and nominating persons with appropriate qualifications for holding directorships. Under the first procedure, a resolution will have to be adopted at the shareholders’ meeting and cumulative voting will be used. The objective is to protect the right of minority shareholders. Under the second procedure, the Board of Directors can adopt a resolution approving the election of the director, based on the qualifications which are suitable for the vacant directorship. As regards the election of independent directors, the election must be in compliance with the requirements imposed by the BOT. 2. Procedure for electing the Executive Committee Thanachart Bank’s Board of Directors may elect a number of persons as it deems appropriate to form the Executive Committee. One of the members of the Executive Committee shall serve as Chairman,
with the Executive Committee being authorized to manage and conduct Thanachart Bank’s business affairs
as assigned by Thanachart Bank’s Board of Directors. The Chief Executive Officer will be ex-officio Chairman
of the Executive Committee. 3. Procedure for electing the Audit Committee Thanachart Bank’s Board of Directors may elect the Audit Committee consisting of independent directors having qualifications determined by the BOT and in compliance with the notification issued by the SET with details as follows: 1) Holding shares not more than 0.5 percent of paid-up capital of the Bank, affiliated company, associated company or related company, including shares held by persons related to the independent director. 2) Not taking part in the management or being an employee, staff, or advisor who receives salary, or a controlling person of the Bank, a regular salary from the Bank, member company of the Group, affiliated company, associated company, related company or a person who has authority controlling a juristic person that may have a conflict of interest (at present and during the past two years). 3) Not having a business relationship with the Bank, member company of the Group, affiliated company, subsidiary company or juristic person that may have a conflict of interest that obstructs the independent opinion. 4) Not being a person related by blood or registration under laws, such as father, mother, sibling and child, including spouse of children, executives, major shareholders, controlling persons, or persons to be nominated as executive or controlling person of the Bank, member company of the Group, affiliated company, subsidiary company or related company. 5) Neither having a relationship with the Bank in the form of its professional service provider such as auditor and financial advisor nor having a business relationship with the Bank, which has cash
or value in such a material amount as stipulated (at present or during the past two years before election). 6) Not being a representative of any member of the Bank’s Board of Directors or any major shareholder. Nor being a shareholder related to the major shareholders. 7) Not being simultaneously an audit committee member of any listed company of the Group, associated company or subsidiary company. 8) Not having any prohibited characteristic that undermines independence in carrying out his or her duties as director. 206
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Performance Evaluation Thanachart Bank’s Board of Directors had arranged for the evaluation of the Board’s performance in 2008, using the SET’s performance evaluation form as a guideline. The evaluation focuses on the overall performance of the Board as a group in nine areas: preparedness of the Board; strategy setting and policy making; risk management and internal control; prevention of conflicts of interest; monitoring financial reports and operations; the Board’s meetings; the Board and the Bank’s policies; the Board and training & development; and others. In addition, Thanachart Bank had arranged for the performance evaluation of the Chief Executive Officer, making use of the evaluation form which compared performance against the annual targets and plan,
as well as taking into consideration the Key Performance Indicators (KPIs) which were in line with CEO’s
Six-point Agenda. The Remuneration Committee would submit the performance evaluation results to the
Bank’s Board of Directors for consideration. Remuneration Policy for Directors and Executives Thanachart Bank determines the remuneration of its directors by comparing it with the remuneration of directors in the same industry. It is used as benchmark to be considered along with duties, roles and scope of responsibilities of each director. Having considered and assess the remuneration of the directors, the Remuneration Committee proposes it to Thanachart Bank’s Board of Directors for consideration before presenting the proposal at the shareholders’ meeting for approval. The remuneration is paid in the form of meeting stipends, monthly compensation and performance allowance. As regards the remuneration of members of committees, they will receive the remuneration determined by Thanachart Bank’s Board of the Directors, based on the proposal made by the Remuneration Committee which take into account their duties and responsibilities in comparison with those in the same industry. The remuneration will be paid in the form of meeting stipends and/or position allowance. The remuneration of the executives will be paid in line with the policy and benchmarks that are linked to the performance of Thanachart Bank and the performance of each executive. The performance will be evaluated, taking into account the Key Performance Indicators (KPIs) to be established annually.
The remuneration of the executives will be paid in the form of salaries and allowances. Their average payments are comparable with the standards in the same industry.
Directors’ Remuneration
A) Financial Remuneration Thanachart Bank has adopted a clear and transparent policy on directors’ remuneration.
The Remuneration Committee is responsible for reviewing the remuneration packages, ensuring that they are appropriate. Apart from comparing them with those offered in the same industry, the Remuneration Committee takes into account the duties and responsibilities of the directors as well as Thanachart Bank’s financial status. In addition, the directors who are appointed as members of other committees will receive additional compensation in line with the increase in their workload. The guidelines on the directors’ remuneration are as follows: 1. The remuneration of Thanachart Bank’s directors is approved by shareholders. 2. The directors who also serve as members of committees will receive additional compensation as determined by Thanachart Bank’s Board of Directors, with the consent of the shareholders. 3. The executives at the level of chief executive officer and above are entitled to receive
the remuneration as executives in the amount determined by Thanachart Bank’s Board of Directors. The details of the payments made by Thanachart Bank to the directors and executives for performing their duties in 2008 are as follows:
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
207
1) Details of the remuneration of Thanachart Bank’s directors:
Types of remuneration (baht per year)
List of Directors
Monthly Compensation
Meeting Stipends
Annual Performance Allowance
Total
Independent directors
1. Mr. Kiettisak Meecharoen 310,400.00 241,200.00 721,825.45 2. Mr. Narong Chivangkur 310,400.00 241,200.00 721,825.45 3. Mr. Suvit Arunanondchai 310,400.00 241,200.00 721,825.45 4. Mr. Sathaporn Jinachitra 310,400.00 222,300.00 360,912.72 Non-executive directors 1. Mr. Banterng Tantivit 620,000.00 496,200.00 1,443,650.89 2. Mr. Vichit Yarnamorn 310,400.00 223,200.00 721,825.45 3. Mrs. Michele Kwok 436,700.00 184,500.00 360,912.72 4. Mr. Brendan King 461,700.00 294,300.00 360,912.72 Executive directors 1. Mr. Suphadej Poonpipat 310,400.00 241,200.00 721,825.45 2. Ms. Suvarnapha Suvarnaprathip 310,400.00 222,300.00 721,825.45 Directors resigning during 2007 1. Mr. Chaipatr Srivisaryacha - - 180,456.36 2. Mr. Bundit Cheevadhanarak - - 421,064.84 Total
Note:
2,607,600.00
7,458,862.95
2,559,850.89 1,255,425.45 982,112.72 1,116,912.72
1,273,425.45 1,254,525.45
180,456.36 421,064.84 13,757,662.95
1. The annual performance allowance which was approved at the 2008 annual general meeting of shareholders was for the directors who held their directorship in 2007. As a result, the directors who resigned before the date of the payment of the annual performance allowance were also entitled to the allowance. They included the following: - Mr. Chaipatr Srivisarvacha resigned his directorship of Thanachart Bank on 23 April 2007. - Mr. Bundit Cheevadhanarak resigned his directorship of Thanachart Bank on 19 July 2007. 2. Mr. Sathaporn Jinachitra, Mrs. Michele Kwok and Mr. Brendan King have assumed their directorships of Thanachart Bank since 19 July 2007
208
3,691,200.00
1,273,425.45 1,273,425.45 1,273,425.45 893,612.72
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
2) The total payments made to three directors of the Audit Committee in the form of meeting stipends amounted to 700,000.00 baht.
Name List
Amount (Baht per Year)
1. Mr. Kiettisak Meecharoen 2. Mr. Suvit Arunanondchai 3. Mr. Sathaporn Jinachitra
350,000.00 175,000.00 175,000.00
Total
700,000.00
3) The total payments made to three directors of the Nomination Committee in the form
of meeting stipends amounted to 120,000.00 baht.
Name List 1. Mr. Narong 2. Mr. Vichit 3. Mr. Suvit
Amount (Baht per Year)
Chivangkur Yarnamorn Arunanondchai
Total
60,000.00 30,000.00 30,000.00 120,000.00
4) The total payments made to two directors of the Remuneration Committee in the form of meeting stipends amounted to 65,000.00 baht.
Name List 1. Mr. Narong 2. Mr. Vichit
Amount (Baht per Year)
Chivangkur Yarnamorn
Total
45,000.00 20,000.00 65,000.00
5) As the remuneration for Thanachart Bank’s Executive Committee and Board of Directors
has not yet been determined and there was no payment made to their members. 6) In relation to the remuneration of Thanachart Bank’s executives, based on the guidelines
of the Office of the SEC, there were 7 persons in total who were considered executive at the level of manager or the first four executives in the management level below the manager. The total payments made to them in the form of salaries, cost-of-living allowances and contribution payments to the provident fund amounted to 44,474,514.00 baht. 7) As regards independent directors’ remuneration which was received from subsidiaries of Thanachart Bank, one of the Bank’s independent directors assumed a directorship in Thanachart Life Assurance and received a payment of 135,000.00 baht in total in 2008. B) Remuneration other than cash payments - None
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
209
Report of the Nomination Committee
The Board of Directors of Thanachart Bank Public Company Limited has appointed the Nomination
Committee. As of 31 December 2008, the Nomination Committee comprises of 3 members as follows:
Mr. Narong Chivangkur
Chairman of the Nomination Committee (Independent Director)
Mr. Vichit
Yarnamorn
Member of the Nomination Committee (Non-Executive Director)*
Mr. Suvit
Arunanondchai
Member of the Nomination Committee (Independent Director)*
The Nomination Committee has roles and responsibilities to establish the guidelines and procedures
for nominating the Director, Members of the various committees and Chief Executive Officer. This includes conducting the succession plan for the management positions and selecting and proposing candidates with appropriate qualifications according to the Bank’s rules, regulations and good corporate governance.
During the nomination of the Directors, Members of the various committees and Chief Executive Officer,
the Nomination Committee shall consider the Board structure, its constituent, the proportion of the independent directors and total number, including qualifications, knowledge, capabilities, skills and experiences that can benefit the Bank’s operations and promote the good corporate governance.
(Mr. Narong Chivangkur)
Chairman of the Nomination Committee
Note: * Currently, Mr. Vichit Yarnamorn and Mr. Suvit Arunanondchai are no longer Committee Member. They have retired from the
210
position as Committee Members on 23 February 2009.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Report of the remuneration Committee
The Board of Directors of Thanachart Bank Public Company Limited. has appointed the Remuneration
Committee. As of 31 December 2008, the Remuneration Committee comprises of 3 members as follows:
Mr. Narong Chivangkur
Chairman of the Remuneration Committee (Independent Director)
Mr. Vichit
Member of the Remuneration Committee (Non-Executive Director)*
Mr. Brendan King
The Remuneration Committee has roles and responsibilities to establish the remuneration structure of
Yarnamorn
Member of the Remuneration Committee (Non-Executive Director)
the Directors, Members of the Various Committees and the Chief Executive Officer. The Committee has considered the appropriateness of the remunerations towards their respective duties, responsibilities, performances whereby these shall be in accordance with the Bank’s policy, its performance, business environment and the overall economic situation.
Therefore, after the consideration, the Remuneration Committee has stated that the remunerations of
Directors and the executives disclosed in the 2008 Annual Report are at the appropriate level and have been approved by the Board of Directors.
(Mr. Narong Chivangkur)
Chairman of the Remuneration Committee
Note: *Currently, Mr. Vichit Yarnamorn has retired from the position as the Board of Directors on 23 February 2009.
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
211
supervision and management structures
Risk Management
BOARD OF DIRECTORS
Credit Analysis
Internal Audit Risk Management Committee
Remuneration Committee
Nomination Committee
Audit Committee
Risk Control
Compliance
EXECUTIVE COMMITTEE
Business Continuity Plan
Asset & Liability Management Committee
Investment Portfolio Committee
Credit Committee
IT Security Management Committee
MANAGEMENT COMMITTEE
Advisors
Managing Director Office
Compensation & Salary
CHIEF EXECUTIVE OFFICER
Business Group
Supporting Group
Branch Network
Operation
Retail
Human Resource Management
SMEs
Communication & Brand Management
Corporate
Business Support
Institution Customer
System & Regulatory Development
Treasury and Foreign
General Administration
Product Development
Data Management Center
Channel Development
Information System & Technology
Accounting As of 31 December 2008
212
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Internal Audit
board of directors and executives (as of 31 december 2008)
the board of directors Mr. Banterng Tantivit Chairman (Non-executive Director) Age 64 years Education(s) - Master of Science (Finance), Massachusetts Institute of Technology, USA. - Bachelor of Science in Electrical Engineering, Massachusetts Institute of Technology, USA. - Director Accreditation Program (DAP), Class 25/2004, Thai Institute of Directors Association Experience(s) in the past 5 years 2006 - Present - Vice Chairman, Thanachart Insurance Company Limited - Director, Arsom Silp Institution of the Arts Council - Director, Siam Piwat Holding Company Limited 2005 - Present - Chairman, Thanachart Life Assurance Company Limited 2003 - Present - Chairman, MBK Resort Public Company Limited - Director, B.V. Holding Company Limited - Director, Plan Estate Company Limited - Director, Siam Piwat Company Limited 2001 - Present - Advisor, Dusit Thani Public Company Limited - Advisor, Pathum Ricemill & Granary Public Company Limited 1994 - Present - Chairman, Thanachart Capital Public Company Limited (Original name was National Finance Public Company Limited and was registered to change name in 2006) 1989 - Present - Chairman and Chairman of Executive Committee, MBK Public Company Limited (Holding Chairman position in 2006) 1987 - Present - Director, Deebuk Company Limited - Director, Thai Farming Company Limited Family relationship with management None No. of TBANK share(s) held None
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
213
Mr. Suphadej Poonpipat Vice Chairman, Chairman of Executive Committee, and Chief Executive Officer (EXECUTIVE DIRECTOR) Age 58 years Education(s) - Master of Science, University of Wisconsin, USA. - Bachelor of Business Administration and Accounting, Chulalongkorn University - Director Accreditation Program (DAP), Class 8/2004, Thai Institute of Directors Association Experience(s) in the past 5 years 2007 - Present - Director, Royal Orchid Hotel (Thailand) Public Company Limited - Director, Thai Royal Orchid Real Estate Company Limited 2006 - Present - Director, Siam Piwat Holding Company Limited 2005 - Present - Director and Chairman of Executive Committee, Thanachart Insurance Company Limited - Director, MBK Resort Public Company Limited 2003 - Present - Director and Chairman of Executive Committee, Thanachart Life Assurance Company Limited - Director, Plan Estate Company Limited - Director, Siam Piwat Company Limited - Vice Chairman and Vice Chairman of Executive Committee, MBK Public Company Limited (Holding Vice Chairman position in 2006) 2000 - Present - Advisor, Pathum Ricemill & Granary Public Company Limited 1992 - Present - Director, Advanced Info Service Public Company Limited 1990 - Present - Vice Chairman, Chairman of Executive Committee and President & Chief Executive Officer, Thanachart Capital Public Company Limited (Holding President & Chief Executive Officer position in 1990 and Vice Chairman and Chairman of Executive Committee in 2007) (Original name was National Finance Public Company Limited and was registered to change name in 2006) Family relationship with management None No. of TBANK share(s) held None
214
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Mr. Kiettisak Meecharoen Chairman of the Audit Committee (Independent director) Age 62 years Education(s) - Master of Theoretical Economics, Keio University, Japan - Bachelor of Science in Finance, Hitotsubashi University, Japan - Director Accreditation Program (DAP), Class 40/2005, Thai Institute of Directors Association - Audit Committees Program (ACP), Class 10/2005, Thai Institute of Directors Association - Banking and Monetary Policy in Developing Countries Program, Harvard University Experience(s) 2005 - Present - Independent Director, Tararom Enterprise Public Company Limited 2000 - Present - Independent Director, Thanachart Life Assurance Company Limited - Independent Director and Chairman of Audit Committee, Safety Insurance Public Company Limited (Holding the Chairman position of Audit Committee in 2004) 2000 - 2004 - Member of Audit Committee, Safety Insurance Public Company Limited 1997 - 1999 - Assistant Governor, Bank of Thailand Family relationship with management None No. of TBANK share(s) held None Mr. Narong Chivangkur Chairman of the Nomination Committee and Chairman of the Remuneration Committee (Independent Director) Age 64 years Education(s) - Management Development Program, Asian Institute of Management, Philippines - Financial Management Program, Rochester Institute of Technology, USA. - Successful Formulation & Execution the Strategy (SFE), Class 2/2008, Thai Institute of Directors Association - Role of the Compensation Committee (RCC), Class 4/2007, Thai Institute of Directors Association - Corporate Social Responsibility (CSR), Class 1/2007, Thai Institute of Directors Association - Director Certification Program (DCP), Class 34/2003 Thai Institute of Directors Association Experience(s) in the past 5 years 2005 - Present - Director, Mom Chailai Development Company Limited 2004 - Present - Director, Momentum Sale and Distribution Company Limited 2003 - Present - Director, Momentum IM Company Limited 2002 - Present - Director, Momentum Consulting Company Limited 2000 - Present - Director, Momentum BBS Company Limited Family relationship with management None No. of TBANK share(s) held None
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
215
Mr. Suvit Arunanondchai Member of the Audit Committee and Member of the Nomination Committee (Independent director) Age 59 years Education(s) - Bachelor of Arts, Louisiana Tech University, USA. - Program for Management Development, Harvard University Graduate School of Business Administration, USA. - Improving the Quality of Financial Reporting (QFR), Class 2/2006, Thai Institute of Directors Association - Audit Committees Program (ACP), Class 4/2005, Thai Institute of Directors Association - Director Certificate Program (DCP), Class 14/2002, Thai Institute of Directors Association Experience(s) in the past 5 years 2002 - Present - Director, Five Stars Hospitality Company Limited 2001 - Present - Director, ORIX Auto Leasing (Thailand) Company Limited 1995 - Present - President, Thailand Leasing Association 1985 - Present - Director, Ratchaburi Sugar Company Limited 1984 - Present - President, Thai Computer Leasing Company Limited 1978 - Present - President, Thai ORIX Leasing Company Limited Family relationship with management None No. of TBANK share(s) held None Mr. Sathaporn Jinachitra Member of the Audit Committee (independent director) Age 60 years Education(s) - Master of Science (Econometrics), The London School of Economics and Political Science (University of London), England - Bachelor of Science (Economics), University College London (University of London), England - Bachelor of Arts (Law), Sukhothai Thammathirat University - Corporate Social Responsibility Program (CSR), Class 1/2007, Thai Institute of Directors Association - DCP Refresher Course, Class 2/2006, Thai Institute of Directors Association - Director Certification Program (DCP), Class 0/2000, Thai Institute of Directors Association Experience(s) 2006 - Present - Dispute Resolution Committee under The National Telecommunications Commission - Director, I Mutchima Company Limited 1999 - Present - Director, Thai Institute of Directors Association (IOD) 2002 - 2006 - President, Export and Import Bank of Thailand 1982 - 1984 - Deputy Director of the Financial Institution Supervision and Examination Department, Bank of Thailand Family relationship with management None No. of TBANK share(s) held None 216
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Ms. Suvarnapha Suvarnaprathip Vice Chairperson of Executive Committee (Executive Director) Age 63 years Education(s) - Bachelor of Economics, Monash University, Australia - Commercial Lending Training Program, Bankers Trust, New York, USA. - Director Accreditation Program (DAP), Class 20/2004, Thai Institute of Directors Association Experience(s) in the past 5 years 2005 - Present - Director, Vice Chairperson of Executive Committee, Member of Nomination Committee and Member of Remuneration Committee, Thanachart Capital Public Company Limited (Holding position of member of Nomination Committee in 2008 and member of Remuneration Committee in 2009). - Director, Thanachart Life Assurance Company Limited 1991 - Present - Director, Seacon Development Public Company Limited Family relationship with management None No. of TBANK share(s) held None Mr. Vichit Yarnamorn Member of the Nomination Committee, Member of the Remuneration Committee (Non-Executive Director), and Information Technology System Advisor Age 62 years Education(s) - Master of Science (Computer Science), University of Iowa, USA. - Audit Committee Program (ACP), Class 18/2007, Thai Institute of Directors Association - Director Accreditation Program (DAP), Class 34/2005, Thai Institute of Directors Association Experience(s) in the past 5 years 2008 - Present - Director, The Grand UB Company Limited 2003 - Present - Director, ACERTS Company Limited 2002 - Present - Independent Director and Member of Audit Committee, IT City Public Company Limited - Director, New Continent Company Limited 2001 - Present - Independent Director, Thai Feed Mills Public Company Limited 2001 - 2007 - Information Technology System Advisor, Thanachart Capital Public Company Limited Family relationship with management None No. of TBANK share(s) held None
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
217
Mrs. Michele Kwok Director (Non-Executive director) Age 49 years Education(s) - Master of Business Administration (Finance & Marketing), University of British Columbia, Canada - Bachelor of Science in Mathematics, University of British Columbia, Canada Experience(s) in the past 5 years 2008 - Present - Director, Canada China Business Council, Canada 2006 - Present - Governor, The Canadian Chamber of Commerce, Hong Kong - Senior Vice President, Asia/Pacific & Middle East, The Bank of Nova Scotia, Hong Kong - Director, Scotiabank (Hong Kong) Limited, Hong Kong - Director, Boracay Limited, Hong Kong - Director, The Bank of Nova Scotia Asia Limited, Singapore - Director, The Bank of Nova Scotia Berhad, Malaysia - Director, Scotiatrust (Asia) Limited, Hong Kong 2004 - 2006 - Vice President, Human Resources, Scotiabank, Canada 2000 - 2004 - Vice President, Commercial Banking, Scotiabank, Canada Family relationship with management None No. of TBANK share(s) held None Mr. Brendan King Member of the Remuneration Committee and member of executive committee (Non-Executive Director) Age 45 years Education(s) - Master of Business Administration (Finance & International Business), York University, Canada - Bachelor of Arts (Business & Economics), York University, Canada Experience(s) in the past 5 years 2005 - Present - Director, Xi’an City Commercial Bank, China 2004 - Present - Director, Scotiabank (Hong Kong) Limited, Hong Kong - Director, Scotia Nominees (Hong Kong) Limited, Hong Kong - Director/Treasurer, The Canadian Chamber of Commerce, Hong Kong - Vice President, Greater China, The Bank of Nova Scotia, Hong Kong 2002 - 2004 - General Manager, International Corporate Finance, Scotiabank (Bahamas) Limited, USA Family relationship with management None No. of TBANK share(s) held None
218
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Mr. Bundit Cheevadhanarak Senior Executive Vice President Age 55 years Education(s) - Master of Business Administration, NIDA - Bachelor of Science, Chulalongkorn University - Bachelor of Law, Sukhothai Thammathirat University - Director Certification Program (DCP), Class 44/2004, Thai Institute of Directors Association - Director Accreditation Program (DAP), Class 6/2003, Thai Institute of Directors Association Experience(s) in the past 5 years 2007 - Present - Chairman, T Leasing Company Limited 2001 - Present - Chairman, Thanachart Legal and Appraisal Company Limited 1999 - Present - Director, Fuel Pipeline Transportation Company Limited 1997 - Present - Director, Thanachart Insurance Company Limited 1996 - Present - Chairman, Thanachart Group Leasing Company Limited 2005 - 2007 - Director, Executive Vice President, Thanachart Bank Public Company Limited 2004 - 2005 - Director, Thanachart Fund Management Company Limited Family relationship with management None No. of TBANK share(s) held None Note: Resignation from Thanachart Bank becomes effective on 1 April 2009.
Mr. Piyaphong Artmangkorn Executive Vice President Age 51 years Education(s) - Master of Public Administration (Taxation), University of Southern California, USA. - Bachelor of Economics, Thammasart University - Director Accreditation Program (DAP), Class 21/2004, Thai Institute of Directors Association Experience(s) in the past 5 years 2005 - Present - Chairman and Chairman of Executive Committee, Thanachart Securities Public Company Limited 1998 - Present - Director and Executive Director, MBK Public Company Limited 2003 - 2005 - Director and Executive Vice President, Thanachart Bank Public Company Limited 2001 - 2008 - Director, Thai Royal Orchid Real Estate Company Limited (Resigned from directorship on July 2008) 2000- 2008 - Director, Royal Orchid Hotel (Thailand) Public Company Limited (Resigned from directorship on July 2008) 1998 - 2005 - Senior Vice President, National Finance Public Company Limited Family relationship with management None No. of TBANK share(s) held None
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
219
Mrs. Noossara Roonsamrarn Executive Vice President Age 50 years Education(s) - Master of Business Administration, NIDA - Bachelor of Political Science, Chulalongkorn University - DCP Refresher Course, Class 4/2007, Thai Institute of Directors Association - Director Certification Program (DCP), Class 19/2002, Thai Institute of Directors Association Experience(s) in the past 5 years 1997 - Present - Director and Member of Audit Committee, Thanachart Insurance Company Limited (Holding position of member of Audit Committee in 2006) 2005 - 2008 - Director and Member of Audit Committee, Thanachart Fund Management Company Limited 1997 - 2005 - Director and Executive Vice President, Thanachart Bank Public Company Limited Family relationship with management None No. of TBANK share(s) held None
Assistant Professor, Flt. Lt., Dr. Executive Vice President (Chief Operating Officer) Sumas Wongsunopparat, M.D., Ph.D. Age 46 years Education(s) - Ph.D. in Strategy & Marketing, Johnson Graduate School of Management, Cornell University, USA. - Master of Science, Cornell University, USA. - Master of Finance & Marketing, Graduate School of Industrial Administration, Carnegie Mellon University, USA. - B.A. in Management, Sukhothai Thammathirat University - MD., Mahidol University Experience(s) in the past 5 years 2007 - Present - Director, Thanachart Training and Development Company Limited - Director, Thanachart Management and Service Company Limited 2006 - 2007 - Senior Vice President in Strategy, Marketing and Business Development, Bangkok Dusit Vetchakarn Public Company Limited 2004 - 2006 - Executive Vice President in Marketing, Strategy, HR and Business Development, Thonburi Hospital and Piyavate Hospital - Chief Operating Officer (COO), and Deputy MD, Rangsit Plaza Company Limited Family relationship with management None No. of TBANK share(s) held None Ms. Vilai Tantikun Senior Vice President, Financial Accounting Control Group Age 56 years Education(s) - Master of Accounting, Chulalongkorn University - Bachelor of Accounting, Chulalongkorn University Experience(s) in the past 5 years 2000 - 2004 - Senior Vice President, National Finance Public Company Limited Family relationship with management None No. of TBANK share(s) held None 220
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Report on the Change in Director and Executive’s Shareholding During the Period from 2008 and 2007 (Information as at 31 December 2008)
no.
position
Name
number number of shares of shares held as at held as at 31 December 31 December 2008 2007
increase (decrease) in number of shares
percentage shareholding in the company (%)
1
Mr. Banterng
Tantivit
Chairman
-
-
-
-
2
Mr. Suphadej
Poonpipat
Vice Chairman
-
-
-
-
3
Mr. Kiettisak
Meecharoen
Independent Director
-
-
-
-
4
Mr. Narong
Chivangkur
Independent Director
-
-
-
-
5
Mr. Suvit
Arunanondchai
Independent Director
-
-
-
-
6
Mr. Sathaporn
Jinachitra
Independent Director
-
-
-
-
7
Ms. Suvarnapha
Suvarnaprathip
Director
-
-
-
-
8
Mr. Vichit
Yarnamorn
Non-Executive Director
-
-
-
-
9
Mrs. Michele Kwok
Non-Executive Director
-
-
-
-
10
Mr. Brendan King
Non-Executive Director
-
-
-
-
11
Mr. Bundit
Cheevadhanarak
Senior Executive Vice President
-
-
-
-
12
Mr. Piyaphong
Artmangkorn
Executive Vice President
-
-
-
-
13
Mrs. Noossara
Roonsamrarn
Executive Vice President
-
-
-
-
14
Assistant Professor, Flt. Lt., Dr.
Executive Vice President
Sumas Wongsunopparat, M.D., Ph.D.
(Chief Operating Officer)
-
-
-
-
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
221
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
X
X
B Managing Director
G Authorized Person in Management
* Thanachart Bank does not have affiliated company.
XX Vice Chairman
A President & Chief Executive Officer
C Senior Executive Vice President
X Director
X
X /
D Executive Vice President
/// Chairman of Executive Committee
E Chief Operating Officer
F Chief Executive Officer
// Vice Chariman of Executive Committee / Executive Director
XXX XXX XXX X
Wongsunopparat D E X
Note: XXX Chairman
Dr. Sumas
D
Mrs. Noossara Roonsamrarn
X
XXX ///
D
Cheevadhanarak C
Mr. Piyaphong Artmangkorn
Mr. Bundit
X / X X X G
Mr. Brendan King
X X X X X X
X X X X X X G
Yarnamorn
X X
Mrs. Michele Kwok
Mr. Vichit
X //
X X
Ms. Suvarnapha Suvarnaprathip X //
Mr. Sathaporn Jinachitra
Arunanondchai X B X X X B
Mr. Suvit
X X X X X
X X X
X X XX //
X X X X X X
X
XX /// F XX /// A X /// X ///
Chivangkur
14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
X X XXX /// XXX X X X X
9 10 11 12 13
Mr. Narong
8
Meecharoen
7
Mr. Kiettisak
6
Poonpipat
3 4 5
XXX XXX XX
2
Mr. Suphadej
XXX
1
related company
Tantivit
subsidiary company
Mr. Banterng
Name
parent company
(Information as of 31 December 2008)
THE INFORMATION OF THE EXECUTIVES AND AUTHORIZED PERSONS’ POSITIONS IN SUBSIDIARY, ASSOCIATED* AND RELATED COMPANIES
TBANK
222
List of Subsidiary and Related companies (Information as of 31 December 2008)
Parent Company
1. Thanachart Capital Public Company Limited
Subsidiary Companies
2. Thanachart Securities Public Company Limited 7. T Leasing Company Limited 3. Thanachart Fund Management Company Limited 8. Thanachart Legal and Appraisal Company Limited 4. Thanachart Training and Development 9. Thanachart Group Leasing Company Limited Company Limited 10. Thanachart Management and Service 5. Thanachart Life Assurance Company Limited Company Limited 6. Thanachart Insurance Company Limited Related Companies
32. Ratchaburi Sugar Company Limited 11. Siam Piwat Company Limited 33. Thai Computer Leasing Company Limited 12. Siam Piwat Holding Company Limited 34. I Mutchima Company Limited 13. MBK Public Company Limited 35. IT City Public Company Limited 14. MBK Resort Public Company Limited 36. ACERTS Company Limited 15. B.V. Holding Company Limited 37. New Continent Company Limited 16. Plan Estate Company Limited 38. Thai Feed Mills Public Company Limited 17. Deebuk Company Limited 39. The Grand UB Company Limited 18. Thai Farming Company Limited 19. Advanced Info Service Public Company Limited 40. Scotiabank (Hong Kong) Limited, Hong Kong 41. Boracay Limited, Hong Kong 20. Royal Orchid Hotel (Thailand) 42. The Bank of Nova Scotia Asia Limited, Public Company Limited Singapore 21. Thai Royal Orchid Real Estate Company Limited 43. The Bank of Nova Scotia Berhad, Malaysia 22. Tararom Enterprise Public Company Limited 44. Scotiatrust (Asia) Limited, Hong Kong 23. The Safety Insurance Public Company Limited 45. Asia/Pacific & Middle East, 24. Momentum Sale and Distribution Company Limited The Bank of Nova Scotia, Hong Kong 25. Mom Chailai Development Company Limited 46. Scotia Nominees (Hong Kong) Limited, 26. Momentum Consulting Company Limited Hong Kong 27. Momentum BBS Company Limited 47. Xi’an City Commercial Bank, China 28. Momentum IM Company Limited 48. The Bank of Nova Scotia, Hong Kong 29. Thai ORIX Leasing Company Limited 30. ORIX Auto Leasing (Thailand) Company Limited 49. Seacon Development Public Company Limited 50. Fuel Pipeline Transportation Company Limited 31. Five Stars Hospitality Company Limited
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
223
executives Chief Executive Officer Mr. Suphadej Poonpipat Vice Chairperson of Executive Committee Ms. Suvarnapha Suvarnaprathip Senior Executive Vice President Mr. Bundit Cheevadhanarak Executive Vice President Mrs. Noossara Roonsamrarn Mr. Piyaphong Artmangkorn Executive Vice President Mrs. Rambha Bhoocha-oom Mr. Amorn Kitinarintranee Mr. Kobsak Duangdee Chief Operating Officer Assistant Professor, Flt. Lt., Dr. Sumas Wongsunopparat, M.D., Ph.D. Risk Management Division Head of Risk Mr. Robert Erickson Risk Management Department Senior Vice President Mr. Kamtorn Tantisirivat Credit Analysis Department Senior Vice President Mrs. Sasima Taweeskulchai Risk Control Department First Vice President Ms. Smai Makboonprasith Wage and Reward Management Department First Vice President Mr. Thaneit Khantigaroon
224
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
internal Audit Division Senior Vice President Mr. Chatchawal Jantararuangtong General Audit and Credit Review Office 1 Vice President Mr. Patana Boonsuk General Audit and Credit Review Office 2 Vice President Mr. Chusak Patcharapongsak Compliance Department First Vice President Mr. Sakda Chantrasuriyarat Policy and Planning Office First Vice President Mr. Prapat Suittiroj Marketing and Funding Division Marketing and Funding Department 1 First Vice President Ms. Chantra Kulkobkiat Marketing and Funding Department 2 Senior Vice President Mrs. Yupin Trangkathumkul Bangkok Branch Network Division Bangkok Branch Network Department 1 Senior Vice President Mrs. Vilaiwan Viryasiri Bangkok Branch Network Department 2 Senior Vice President Mr. Vorachet Cheeva-akrapan Bangkok Branch Network Department 3 First Vice President Mr. Somkuan Chaicharoen
Bangkok Branch Network Department 4 First Vice President Mr. Ekasith Saktanakorn Bangkok Branch Network Department 5 First Vice President Mr. Pompet Rasanon Bangkok Branch Network Department 6 First Vice President Mr. Pichet Charoenjit Up-country Branch Network Division Senior Vice President Mr. Songwut Chaowalit Central Regional Office 1 (Phra Nakhon Si Ayutthaya) Assistant Vice President Mr. Chatchawarn Loung-on Central Regional Office 2 (Saraburi) Senior Manager Mr. Mathis Rukkulcharam Central Regional Office 3 (Nakorn Pathom) Senior Manager Mr. Pheerachai Gajasuta North Eastern Regional Office 1 (Udon Thani) Assistant Vice President Mr. Mongkol Khonoon North Eastern Regional Office 2 (Khon Kaen) Senior Manager Mr. Wanchai Karnjanasiri North Eastern Regional Office 3 (Nakorn Rachasima) Assistant Vice President Mr. Pornsin Choowong Northern Regional Office 1 (Chiang Mai) Assistant Vice President Mr. Udom Chaiyathep
Northern Regional Office 2 (Phitsanulok) Senior Manager Mr. Vichian Pipatnanun Northern Regional Office 3 (Nakorn Sawan) Senior Manager Mr. Wikran Puechpanpaisan Eastern Regional Office 1 (Si Racha) Vice President Mr. Wichai Luangsrisook Eastern Regional Office 2 (Rayong) Assistant Vice President Mr. Sunan Ammiran Southern Regional Office 1 (Phuket) Vice President Mr. Phoonsin Sinthanaphat Southern Regional Office 2 (Surat Thani) Vice President Mr. Nopporn Juntaboon Southern Regional Office 3 (Nakorn Si Thammarat) Senior Manager Mr. Suthep Nabangtai Southern Regional Office 4 (Hat Yai) First Vice President Mr. Sanya Thematma Retail Collection & Acquisition Car Management Division Senior Vice President Mr. Sanong Khumnuch Bangkok Collection Office Vice President Mr. Somchai Angpromstan
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
225
Retail Loan & SMEs Loan Senior Vice President Mr. Seth Cechetto National Retail Loan Department First Vice President Mr. Wichak Praditavanij Housing Loan Approvals Head of Housing Loan Approvals Mr. Thanes Ratanakorn Housing Loan Product Management Department Head of Housing Loan Product Management Mrs. Tharita Chitaravimol Corporate Banking Division
Corporate Investment Banking Division Corporate Investment Department 1 First Vice President Mr. Anawat Leelawatwatana Treasury and Foreign Division Head of Treasury Mr. Lalit Dharmaseri Capital Markets Equity Investment/Derivative Department First Vice President Mr. Termpong Bunajinda Foreign Exchange Department First Vice President
Senior Vice President Mr. Noel Singh Head of Strategic Planning Head of Strategic Planning Mrs. Viwan Khunphasee Head of Business Support Head of Business Support Ms. Kamolthip Sritharakul Head of Sale 1 Head of Sale 1 Mr. Wisoot Tangadunrat Head of Sale 2 Head of Sale 2 Mrs. Wanida Supanantaroek Head of Commercial Underwriting Head of Commercial Underwriting Mr. Wathanyu Nithyayon Head of Credit Review Head of Credit Review Mr. Patchara Dolsooklert
Mr. Thanit Satravaha Fixed Income Department First Vice President Mr. Apichat Stiensape Head of Operation Senior Vice President Mr. Ricky Yakabowich Operation and Support Division Senior Vice President Mr. Chatchai Kaivalkul Securities and Trustee Service Department First Vice President Mrs. Orauma Shayya Credit Card Operations Department First Vice President Mr. Pichit Sanamtong Head of Operations Support Service Head of Operations Support Service Mr. Naris Saifuk
226
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Branch Management Department Senior Vice President Mr. Somchai Boonmar First Vice President Mr. Punnawich Soopunyo Trade Finance Department Senior Vice President Mrs. Ninna Korprapun IT Quality Control Department Senior Vice President Mr. Pradit Rungcharoenporn Treasury Operations Department Head of Treasury Operation Ms. Suthatip Ampaporn Human Resource Division Human Resource Strategic Planning Department First Vice President Mr. Saengsoon Saengprasit Recruitment & Human Resource Management Department First Vice President Mrs. Ubolrat Busyakanistha Recruitment Group 1 First Vice President Ms. Areeluxsana Ruangpholronachai Management Development Department First Vice President Mrs. Kanya Subboonrawd System & Regulatory Development Department Senior Vice President Mr. Kriangkrai Phurivitvattana First Vice President Mrs. Yada Thaipinnarong First Vice President Mr. Pornpichai Worathamrong
Communication and Brand Management Division Senior Vice President Mr. Vicha Kulkobkiat Data Management Center Department First Vice President Mr. Gasamand Geaw-im Bank Product Development Division Head of Product Mr. Praphan Anupongongarch Credit Card & Personal Loan Product Head of Credit Card & Personal Loan Product Mr. Jean-Marc Dallaire Hire Purchase Product Development Division Senior Vice President Mr. Anuchart Deeprasert Financial Accounting Control Division Senior Vice President Ms. Vilai Tantikun Non-Business and Subsidiaries Account Department First Vice President Mr. Pichit Pakjamsai Project Management Department Senior Vice President Mr. Patipan Manyanoondh Electronic Channel Development Office Vice President Mr. Pornchai Pankitcharoen Business Channel Development Office Vice President Mr. Taveesak Sirithanon Information and Technology Department Senior Vice President Mrs. Kjitphan Chunharit First Vice President Mr. Komson Kachanun ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
227
GENERAL INFORMATION
investment of thanachart bank public company limited in other companies The following is a list of companies in which Thanachart Bank Public Company Limited made investments
in 2008, in the form of shareholding in the amount of 10 percent or more of the total number of shares issued.
Company/Location
Type of Business
Subsidiaries Thanachart Securities Public Securities Company Limited 444 MBK Tower, 14th, 18th, and 19th Floor, Phayathai Road, Wangmai, Pathumwan, Bangkok 10330 Tel. +66 (0) 2217-8888, 2611-9222, 2217-9595 Fax. +66 (0) 2217-9642 Thanachart Insurance Non-life Company Limited Insurance 1 Glas Haus Building, 10th Floor, Sukhumvit 25 Rd, North Klongtoey, Wattana, Bangkok 10110 Tel. +66 (0) 2661-7999 Fax. +66 (0) 2665-7304 Thanachart Life Assurance Life Company Limited Assurance 231 Thanachart Life Assurance Building, Rachadamri Road, Lumpini, Pathumwan, Bangkok 10330 Tel. +66 (0) 2207-4200 Fax. +66 (0) 2253-8484 Thanachart Fund Management Mutual Fund Company Limited Management 898 Ploenchit Tower, 15th and 18th Floor, Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Tel. +66 (0) 2126-8300 Fax. +66 (0) 2263-0875 Thanachart Broker Company Limited Insurance 1 Glas Haus Building, 4th Floor, Broker Soi Sukhumvit 25,North Klongtoey, Wattana, Bangkok 10110 Tel. +66 (0) 2685-0300 Fax. +66 (0) 2685-0333 228
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Type of Shares
Registered capital (Baht)
Ordinary Share
1,700,000,000 1,500,000,000
Paid-up capital (Baht)
issued shares
proportion total number of total of shares shares held held (%)1
1,500,000,000
1,499,999,930
100.00
Ordinary Share
740,000,000
740,000,000
74,000,000
73,999,434
100.00
Ordinary Share
500,000,000
500,000,000
50,000,000
49,999,400
100.00
Ordinary Share
100,000,000
100,000,000
10,000,000
7,499,993
75.00
Ordinary Share
100,000,000
100,000,000
10,000,000
9,999,000
99.99
Company/Location
Type of Business
Type of Shares
Thanachart Group Leasing Leasing Ordinary Company Limited Share 444 MBK Tower, 11th Floor , Phayathai Road, Wangmai, Pathumwan, Bangkok 10330 Tel. +66 (0) 2217-8000 Fax. +66 (0) 2611-9488 Thanachart Management and Services Ordinary Service Company Limited Share 128/23 , 3rd Floor, Phayathai Plaza Office, Phayathai Road, Phayathai, Ratchathewi, Bangkok 10400 Tel. +66 (0) 2612-1500 Fax. +66 (0) 2612-1400 Thanachart Legal and Appraisal Legal and Ordinary Company Limited Appraisal Share 128/20-21 3rd Floor, Services Phayathai Plaza Office, Phayathai Road, Phayathai, Ratchathewi, Bangkok 10400 Tel. +66 (0) 2216-6677 Fax. +66 (0) 2216-9022 Thanachart Training and Training Ordinary Development Company Limited Share 207/6 Thanachart Building, 5th Floor, Ratchadaphisek Road, Dindang, Bangkok 10400 Tel. +66 (0) 2290-3410 Fax. +66 (0) 2290-3419 T Leasing Company Limited Hire Ordinary 333 Thanachart Wongsawang Purchase Share Building, 3rd Floor, Ratchadaphisek Road, Bangsue, Bangkok 10800 Tel. +66 (0) 2832-2555 Fax. +66 (0) 2832-2556 National Leasing Hire Ordinary Company Limited2 Purchase Share 444 MBK Tower, 12th Floor, Phayathai Road, Wangmai, Phayathai, Pathumwan, Bangkok 10330 Associated Company Siam Media and Communication Communication Ordinary Company Limited3 Share 18 SCB Park Plaza Tower 2 West, 17th-22nd Floor, Ratchadaphisek Road, Ladyao, Chatuchak, Bangkok 10900 Note:
1 2 3
Registered capital (Baht)
Paid-up capital (Baht)
issued shares
proportion total number of total of shares shares held held (%)1
360,000,000
360,000,000
36,000,000
35,999,994
100.00
6,000,000
6,000,000
600,000
599,993
100.00
10,000,000
10,000,000
1,000,000
999,993
100.00
5,000,000
5,000,000
500,000
499,993
100.00
180,000,000
180,000,000
18,000,000
17,998,200
99.99
60,000,000
60,000,000
600,000
599,994
100.00
700,000,000
700,000,000
7,000,000
1,633,800
23.34
Shareholding percentage shown above included the shareholding held by related parties. Thanachart Bank indirectly held 100 percent through Thanachart Group Leasing Company Limited which was in line with the definition of subsidiaries announced by the Stock Exchange of Thailand “SET�. Freezing Assets
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
229
thanachart bank’s references
Name Type of Business Location of Head office Registration No. Website Telephone Fax. Thanachart Smartphone Thanachart Contact Center SWIFT BIC TELEX Registered Capital Paid-up Capital Reference Securities Registrar Debentures Registrar
Thanachart Bank Public Company Limited “TBANK” Commercial Bank, according to the Financial Institution Business Act and related notifications of the Bank of Thailand 900 Tonson Tower, Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330, Thailand 0107536001401 (Former No. Bor.Mor.Jor. 214) www.thanachartbank.co.th +66 (0) 2655-9000 +66 (0) 2655-9001 1589 (Contact channel via telephone for financial transaction of the Bank) 1770 THBKTHBK 20323 NBANK TH 19,346,192,920 baht (nineteen thousand three hundred and forty six million one hundred and ninety two thousand nine hundred twenty baht only) 17,346,192,920 baht (seventeen thousand three hundred and forty six million one hundred and ninety two thousand nine hundred twenty baht only) Thailand Securities Depository Company Limited 62 The Stock Exchange of Thailand Building, Ratchadaphisek Road, Klongtoey, Bangkok 10110, Thailand Tel. +66 (0) 2229-2800 Fax. +66 (0) 2359-1259 Thanachart Bank Public Company Limited 900 Tonson Tower, Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Tel. +66 (0) 2655-9000 Fax. +66 (0) 2655-9001
Note: Being a registrar of 3,000 million baht unsecured subordinated debentures of
Thanachart Bank Public Company Limited no. 1/2006 with maturity in 2013.
TMB Bank Public Company Limited 3000 Phaholyothin Road, Chomphon, Chatuchak, Bangkok, 10900, Thailand Tel. +66 (0) 2299-1111 Fax. +66 (0) 2273-7121-4, 2273-7857
Note: Being a registrar of 5,000 million baht unsecured subordinated debentures of Thanachart Bank Public Company Limited no. 1/2008 with maturity in 2015.
Auditor
Legal Advisor
230
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Miss Ratana Jala, Certified Public Accountant No. 3734 Ernst & Young Office Limited 193/136-137 Lake Rajada Office Complex, 33rd Floor, Rachadaphisek Road, Klongtoey, Bangkok 10110, Thailand Tel. +66 (0) 2264-0777 Fax. +66 (0) 2264-0789-90 Thanachart Legal and Appraisal Company Limited 128/20-21 Payathai Plaza Office, 3rd Floor, Phayathai Road, Thung Phayathai, Ratchathewi, Bangkok 10400, Thailand Tel. +66 (0) 2216-6677 Fax. +66 (0) 2216-6558
structure of major shareholders
no.
name of shareholders
shareholding (percent)
common share
1.
Thanachart Capital Public Company Limited
883,279,930
50.92
2.
The Bank of Nova Scotia
849,920,153
48.99
3.
Ms. Kittima Tolieng
104,200
0.01
4.
Ms. Piengjai Hanphanit
96,665
0.01
5.
Thai Finance and Securities Public Company Limited*
90,000
0.01
6.
Mr. Wanchai Chirathivat
84,809
0.00
7.
Mr. Thanawat Chareonthassanont
70,000
0.00
8.
Mr. Wayne Huang
40,000
0.00
9.
Mr. Chuan Tomeechai
36,000
0.00
10.
Thippitak Company Limited
32,625
0.00
11.
Other Shareholders
864,910
0.05
1,734,619,292
100.00
Total Paid-up Capital
Thai Shareholders
884,655,839
51.00
Foreign Shareholders
849,963,453
49.00
Note: * Thai Finance and Securities Public Company Limited’s assets were frozen by receivership of Legal Execution Department Source: Report of the Bank’s Major shareholders as at 3 February 2009 prepared by Thailand Securities Depository Company Limited
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
231
Dividend Policy Dividend Payment Policy of Thanachart Bank The Bank may issue dividend payment to its shareholders whenever there is sufficient profit taking into consideration capital adequacy to support bank operations and required reserve. Profit remaining after dividend payments will be used as other provisions as deemed appropriate by the Bank’s Board of Directors. Nevertheless, the Bank’s Board of Directors may approve of interim dividend payment depending on whether the Bank has sufficient profitability and when the dividend has been paid out, such transaction will be reported at the next shareholders’ meeting. Moreover, dividend payments must be in accordance with the Notification of the Bank of Thailand
No. SorNorSor. 31/2008 regarding Classification and Provisioning of Financial Institution dated 3 August 2008, which states that as long as the financial institution has not written off losses incurred through bad or irrecoverable assets or made full provisioning for bad or irrecoverable assets, the financial institution shall not make dividend payment or payment of benefit in any other form to the shareholders. The Notification of
the Bank of Thailand No. SorNorSor. 67/2008 regarding Accounting Recording of the Financial Institution dated
3 August 2008 stipulates that the financial institution should not pay dividend with unrealized profit or cash flow which has not been received, e.g. mark-to-market profit of securities or profit from financial asset transfer.
The financial institution should not pay dividend with the revenue generated from asset sale that did not come from genuine sale transaction since such figure may cause extraordinary profit or loss, e.g. profit from foreclosed asset disposal of the financial institution which has a repurchase agreement and etc. According to the profit allocation in 2006 and 2007, the Bank paid dividends of 0.15 baht per share in 2007 and 0.43 baht per share in 2008 respectively to its shareholders. Dividend Payment Policy of the Subsidiary Companies The dividend payment policy of the subsidiary companies is subject to the resolution to be adopted by the shareholders or by the Board of Directors of the respective subsidiary companies (depending on the case). Each time before making dividend payment, the subsidiary companies are required to appropriate at least
5 percent of the net profit as reserve to such an extent that the reserve amounts to 10 percent or more of their capital, in case there is a regulation in the company’s Articles of Association. If the subsidiary company is
the public company limited, the company has to appropriate not less than 5 percent of the annual profit after deducting accumulated loss balance (if any) as reserve to such an extent that the reserve amounts to
10 percent of the registered shares, unless the company is enforced by other regulation or law to have more reserve than that. Group of major shareholders which has a significant impact on the formulation of management policies Thanachart Bank has 2 major shareholders that, by behavior, have significant influence on
the establishment of its management policies. The 2 major shareholders are Thanachart Capital Public Company Limited, which holds 50.92 percent of the total paid-up shares, and the Bank of Nova Scotia “Scotiabank”, which holds 48.99 percent of the total paid-up shares. Thanachart Capital Public Company Limited does not have any major shareholder that has significant influence on the establishment of its management policies or its operation.
232
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
COMPANIES IN THANACHART GROUP Thanachart Fund Management
Thanachart Capital Public
Company Limited
Company Limited 444 MBK Tower, 10 - 11 and 15 - 20 Floor,
898 Ploenchit Tower, 15th and 18th Floor,
Phayathai Road, Wangmai, Pathumwan,
Ploenchit Road, Lumpini, Pathumwan,
Bangkok 10330, THAILAND
Bangkok 10330, THAILAND
Tel. +66 (0) 2217-8444, 2217-8000, 2611-9111
Tel. +66 (0) 2126-8300
Fax. +66 (0) 2613-6099
Fax. +66 (0) 2263-0875
Registration No. 0107536000510
Registration No. 0105535049696
www.thanachart.co.th
www.thanachartfund.com
Thanachart Bank Public
Thanachart Insurance Company Limited
Company Limited
1 Glas Haus Building, 10th Floor, Sukhumvit 25 Road,
900 Tonson Tower, Ploenchit Road, Lumpini,
North Klongtoey, Wattana, Bangkok 10110, THAILAND
Pathumwan, Bangkok 10330, THAILAND
Tel. +66 (0) 2661-7999
Tel. +66 (0) 2655-9000
Fax. +66 (0) 2665-7304
Fax. +66 (0) 2655-9001
Registration No. 0105540060091
Registration No. 0107536001401
www.thanachartinsurance.co.th
th
th
th
th
www.thanachartbank.co.th Thanachart Securities Public
Thanachart Life Assurance
Company Limited
Company Limited
th
th
th
444 MBK Tower, 14 , 18 and 19 Floor,
231 Thanachart Life Assurance Building,
Phayathai Road, Wangmai, Pathumwan,
Ratchadamri Road, Lumpini, Pathumwan,
Bangkok 10330, THAILAND
Bangkok 10330, THAILAND
Tel. +66 (0) 2217-8888, 2611-9222, 2217-9595
Tel. +66 (0) 2207-4200
Fax. +66 (0) 2217-9642
Fax. +66 (0) 2253-8484
Registration No. 0107547000591
Registration No. 0105540057090
www.tnsitrade.com
www.thanachartlife.co.th
Thanachart Contact Center 1770
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
233
BRANCHES OF THANACHART BANK public company limited INFORMATION AS OF 31 DECEMBER 2008
HEAD OFFICE Tonson Office Tel. +66 (0) 2655-9000 Fax. +66 (0) 2655-9585
Bangkok and vicinities bangkok Silom Branch Tel. +66 (0) 2266-7414 Fax. +66 (0) 2266-7416
The Mall Bangkapi Branch Tel. Fax.
+66 (0) 2375-1575 +66 (0) 2375-1686
Lat Phrao Hospital Branch Tel. +66 (0) 2932-2473-5 Fax. +66 (0) 2932-2530 Ratchada Phisek (Glas Haus Building) Branch Tel. +66 (0) 2693-9811 Fax. +66 (0) 2693-9820
Samitivej Hospital Sukhumvit 49 Branch Tel. +66 (0) 2712-7013-5 Fax. +66 (0) 2712-7016 Mah Boonkrong Branch Tel. +66 (0) 2611-5710-5 Fax. +66 (0) 2611-5717 RAMA 4 Branch Tel. +66 (0) 2661-5534-7 Fax. +66 (0) 2661-5539
Thanon Nang Linchi Branch Tel. +66 (0) 2285-1971, 2286-1898 Fax. +66 (0) 2286-1939
Central Rama 2 Branch Tel. +66 (0) 2872-4770 Ext. 111-114 Fax. +66 (0) 2872-4769
Thong Lo Branch Tel. +66 (0) 2381-8422, 2381-8421-2, 2381-8364-5 Fax. +66 (0) 2381-8423
Seacon Square Srinakarin Branch Tel. +66 (0) 2721-9955 Fax. +66 (0) 2721-8321 Central Rama 3 Branch Tel. +66 (0) 2211-8260 Fax. +66 (0) 2211-8190 The Mall Bang Khae Branch Tel. +66 (0) 2803-8310 Fax. +66 (0) 2803-8305
234
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Bang Na Branch Tel. +66 (0) 2397-3757 Fax. +66 (0) 2398-0185 Central Pin Klao Branch Tel. +66 (0) 2884-9680-3 Fax. +66 (0) 2884-9684
Yaowarat Branch Tel. +66 (0) 2221-1868, 2221-1845-7 Fax. +66 (0) 2221-1869 Thanon Phatthanakan Branch Tel. +66 (0) 2369-2814-7 Fax. +66 (0) 2369-2818 Phet Kasem Branch Tel. +66 (0) 2456-0337-42 Fax. +66 (0) 2454-4116
Pratu Num Branch Tel. +66 (0) 2208-0072-5 Fax. +66 (0) 2208-0076
Wong Sawang Branch
Ramkhamhaeng Soi 24 Branch Tel. +66 (0) 2300-4956-8 Fax. +66 (0) 2719-1258
Navaminthra 9 Hospital Branch Tel. +66 (0) 2518-1100, 2518-2360-1 Fax. +66 (0) 2518-2363
Udom Suk Branch Tel. +66 (0) 2398-4024-7 Fax. +66 (0) 2398-4028
Tesco Lotus Bang Kapi Branch Tel. +66 (0) 2377-8029, 2377-8092, 2377-8147 Fax. +66 (0) 2377-8508
Union Mall Lat Phrao Branch Tel. +66 (0) 2511-0236, 2511-0246, 2511-0256 Fax. +66 (0) 2511-0268 Major Ratchayothin Branch Tel. +66 (0) 2512-1082, 2512-1102, 2512-1248 Fax. +66 (0) 2939-5372 Bo Bae Branch Tel. +66 (0) 2356-0755-8 Fax. +66 (0) 2356-0759 Phahon Yothin Soi 9 Branch Tel. +66 (0) 2270-1371-3, 2619-6399 Fax. +66 (0) 2619-6339
Tel. Fax.
+66 (0) 2834-9999 +66 (0) 2834-9905
Phahon Yothin Soi 6 Sub Branch Tel. +66 (0) 2279-9874-6 Fax. +66 (0) 2279-9895 MBK Tower Sub Branch Tel. +66 (0) 2611-9480 Fax. +66 (0) 2611-9557 Thanon Chan Sub Branch Tel. +66 (0) 2285-5360 Fax. +66 (0) 2285-5361 Ratchawong Sub Branch Tel. +66 (0) 2622-9050 Fax. +66 (0) 2622-9029
Esplanade Ratchada Branch Tel. +66 (0) 2354-2052-4, 2660-9252 Fax. +66 (0) 2660-9250
The Mall 2 RamKhamhaeng Sub Branch Tel. +66 (0) 2369-2486, 2369-2482, 2369-2480 Fax. +66 (0) 2369-2484
Ramkhamheang Soi 122 Branch Tel. +66 (0) 2372-2377-9, 2728-2947 Fax. +66 (0) 2728-2950
Silom Complex Sub Branch Tel. +66 (0) 2235-8832 Fax. +66 (0) 2235-8833
The Avenue Chaengwattana Branch Tel. +66 (0) 2573-0673-5 Fax. +66 (0) 2573-0677
Khlong Thom Sub Branch Tel. +66 (0) 2221-1671, 2221-1677 Fax. +66 (0) 2221-1679
Bang Khun Non Branch Tel. +66 (0) 2434-6067-8, 2434-6078, 2882-4595 Fax. +66 (0) 2882-4581
Big C Phet Kasem Sub Branch Tel. +66 (0) 2444-2927, 2444-2904, 2444-2906 Fax. +66 (0) 2444-2909
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
235
MBK Center Sub Branch Tel. +66 (0) 2611-4752-4 Fax. +66 (0) 2611-4751
Thanon Petchaburi Tat Mai Sub Branch
Tesco Lotus Wang Hin Sub Branch Tel. +66 (0) 2578-6194-6 Fax. +66 (0) 2578-6197 Fashion Island Sub Branch Tel. +66 (0) 2519-5742, 2519-5753, 2519-5784 Fax. +66 (0) 2519-5718
Siam Discovery Sub Branch Tel. +66 (0) 2658-0491-3 Fax. +66 (0) 2658-0494
Siwara Sub Branch Tel. +66 (0) 2538-8466, 2538-8670, 2538-8986, 2538-7039 Fax. +66 (0) 538-9378 Carefour Bang Bon Sub Branch Tel. +66 (0) 2416-9969-71 Fax. +66 (0) 2416-9974 Big C Ekkamai Sub Branch Tel. +66 (0) 2714-8274-7 Fax. +66 (0) 2714-8268 Century The Movie Plaza Sub Branch Tel. +66 (0) 2245-8500-2 Fax. +66 (0) 2245-8504 Siam Paragon Sub Branch Tel. +66 (0) 2129-4374-7 Fax. +66 (0) 2129-4372 The Mall Tha Phra Sub Branch Tel. Fax.
+66 (0) 2477-7321-3 +66 (0) 2477-7324
Tel. Fax.
+66 (0) 2254-0252-4 +66 (0) 2254-0255
Money Park Sub Branch Tel. +66 (0) 2686-3960-2 Fax. +66 (0) 2686-3959 Vichaiyut Hospital Sub Branch Tel. +66 (0) 2278-2194-6 Fax. +66 (0) 2278-2606 Thanon Tel. Fax.
Mongkon Sub Branch +66 (0) 2225-3331, 2225-3863, 2225-4757, 2225-6061 +66 (0) 2225-8364
Central World Sub Branch Tel. +66 (0) 2646-1346-9 Fax. +66 (0) 2646-1350 Thanon Sirindhorn Sub Branch Tel. +66 (0) 2434-5028-9, 2434-5947-8 Fax. +66 (0) 2434-5661 Seri Center Sub Branch Tel. +66 (0) 2325-9072-4 Fax. +66 (0) 2325-9075 Sukhumvit Soi 25 Sub Branch Tel. +66 (0) 2259-4727-9 Fax. +66 (0) 2259-4730 Bang Lamphu Sub Branch
Siam Square Sub Branch Tel. +66 (0) 2252-7363-6 Fax. +66 (0) 2252-7367 Big C Don mueang Sub Branch Tel. +66 (0) 2551-0638-9, 2551-0641 Fax. +66 (0) 2551-0642
236
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Tel. Fax.
+66 (0) 2356-0782-6 +66 (0) 2356-0787
Tao Pun Sub Branch Tel. +66 (0) 2520-7292, 2587-7284-5 Fax. +66 (0) 2520-7379
Big C Bang Na Sub Branch Tel. +66 (0) 2396-0482, 2396-0484-5 Fax. +66 (0) 2396-0500
Green Place (Soi Wat Phai Ngoen) Sub Branch
Ratchadamnoen Klang Sub Branch Tel. +66 (0) 2226-3083-5, 2621-2185 Fax. +66 (0) 2621-2186
Nawamin Town Center Sub Branch Tel. +66 (0) 2519-1142, 2519-1154, 2519-1194 Fax. +66 (0) 2946-7432
Tel. Fax.
+66 (0) 2211-3515, 2211-3519-20 +66 (0) 2674-9704
Talat Ying Charoen Sub Branch Tel. +66 (0) 2552-8043, 2552-8045, 2552-8047, 2972-3159 Fax. +66 (0) 2972-3161
Pak Khlong Talat Sub Branch Tel. +66 (0) 2225-1555, 2225-1628-9 Fax. +66 (0) 2623-6527
Lat Krabang Sub Branch Tel. +66 (0) 2327-2754-6 Fax. +66 (0) 2327-2706
Vichaiyut Medical Center Sub Branch Tel. +66 (0) 2357-1916-8 Fax. +66 (0) 2619-7043
Watcharaphon Sub Branch Tel. +66 (0) 2508-2185-7 Fax. +66 (0) 2508-2207
India Emporium Sub Branch Tel. +66 (0) 2224-0133, 2224-0135-6 Fax. +66 (0) 2623-9434
Silom Soi 15 Sub Branch Tel. +66 (0) 2237-4192-4, 2635-0272 Fax. +66 (0) 2635-0270
Sirirat Sub Branch Tel. +66 (0) 2412-4515, 2412-4583-4 Fax. +66 (0) 2866-3218
Sukhumvit Soi 101/1 (Piyarom Place) Sub Branch Tel. +66 (0) 2332-7060-2, 2741-8016 Fax. +66 (0) 2741-8017
Paolo Memorial Hospital Chok Chai 4 Sub Branch Tel. +66 (0) 2514-3277, 2514-3293-4 Fax. +66 (0) 2933-2292
Bang Rak Sub Branch Tel. +66 (0) 2234-4227-9, 2630-9026 Fax. +66 (0) 2630-9027
Carefour Rama 2 Sub Branch Tel. +66 (0) 2451-4402, 2451-4409, 2451-4460 Fax. +66 (0) 2451-4882
Wongwian Yai Sub Branch Tel. Fax.
+66 (0) 2438-2486, 2438-2562, 2438-2567 +66 (0) 2438-2568
The Paseo (Lat Krabang) Sub Branch Tel. Fax.
+66 (0) 2346-4103-4, 2346-4109 +66 (0) 2346-4111
The Park Place Sub Branch Tel. +66 (0) 2252-2677-8, 2651-9037 Fax. +66 (0) 2252-2679
Thanon Suea Pa Sub Branch Tel. +66 (0) 2221-4327-9 Fax. +66 (0) 2623-0579
Si Worachak Sub Branch Tel. +66 (0) 2222-1912, 2222-1917, 2222-1965 Fax. +66 (0) 2622-9338
Thanon Pracha Uthit (Thung Khru) Sub Branch Tel. +66 (0) 2426-7017-9 Fax. +66 (0) 2873-4030
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
237
Big C Sukhaphiban 3 (Ramkhamhaeng) Sub Branch Tel. +66 (0) 2916-3584-5, 2916-3603 Fax. +66 (0) 2916-3607
Bang Yai Branch Tel. +66 (0) 2594-1154, 2594-1152, 2594-1143 Fax. +66 (0) 2594-1161
Central Ram Inthra Sub Branch Tel. +66 (0) 2552-7462, 2552-7467-8 Fax. +66 (0) 2970-5518
Big C Samut Prakan Branch Tel. +66 (0) 2702-1792-3, 2702-1859 Fax. +66 (0) 2702-1982
Suan Phlu Sub Branch Tel. +66 (0) 2287-3084-5, 2287-3074 Fax. +66 (0) 2679-3028
Big C Suk Sawat Branch Tel. +66 (0) 2463-7700, 2463-1894-5 Fax. +66 (0) 2463-7144
Chamchuri Square Sub Branch Tel. +66 (0) 2160-5254-6, 2160-5257 Fax. +66 (0) 2160-5258
Nonthaburi Branch Tel. +66 (0) 2526-3453-6 Fax. +66 (0) 2526-3457
Paolo Memorial Hospital Phahon Yothin Sub Branch Tel. +66 (0) 2357-1774-6, 2616-6027 Fax. +66 (0) 2616-6028
The Mall Ngamwongwan Branch Tel. +66 (0) 2550-1231-4 Fax. +66 (0) 2550-1235
Asok Sub Branch Tel. +66 (0) 2204-1695-7 Fax. +66 (0) 2204-1699 Phahurat Sub Branch Tel. +66 (0) 2221-4409, 2221-4419-20 Fax. +66 (0) 2623-8098 Lat Phrao Soi 101 Sub Branch Tel. +66 (0) 2376-0535-7 Fax. +66 (0) 2376-0539 vicinities Chaengwattana Branch (software park) Tel. +66 (0) 2962-0066, 2962-0415-6 Fax. +66 (0) 2962-0376 Nakhon Pathom Branch Tel. +66 (0) 3421-9131 Fax. +66 (0) 3421-9160 Rangsit Branch Tel. +66 (0) 2567-1117, 2567-5586 Fax. +66 (0) 2567-6694
238
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Imperial World Samrong Branch Tel. +66 (0) 2380-2943-5, 2756-9023 Fax. +66 (0) 2756-9024 Central Rattana thibet Branch Tel. +66 (0) 2525-4736-8 Fax. +66 (0) 2969-7537 Central Chaengwattana Branch Tel. +66 (0) 2193-8114-6 Fax. +66 (0) 2101-0710 Om yai branch Tel. +66 (0) 2420-4920, 2420-4930, 2420-4955 Fax. +66 (0) 2811-6538 Tesco Lotus Rattana Thibet Sub Branch Tel. +66 (0) 2950-1160, 2950-1297 Fax. +66 (0) 2950-1157 Paolo Memorial Hospital Samut Prakan Sub Branch Tel. +66 (0) 2182-7239-41 Fax. +66 (0) 2182-7243
Big C Bang Phli Sub Branch Tel. +66 (0) 2312-2284, 2312-2300 Fax. +66 (0) 2312-2321
Chachoengsao Branch Tel. +66 (0) 3853-5336, 3881-2856-7 Fax. +66 (0) 3881-2874
Talat Thai Sub Branch Tel. +66 (0) 2529-6171-3 Fax. +66 (0) 2529-6175
The Avenue Pattaya Branch Tel. +66 (0) 3872-3933-5 Fax. +66 (0) 3805-2002
Future Park Rangsit Sub Branch Tel. +66 (0) 2958-5116-9 Fax. +66 (0) 2958-5121
Thanon Sukhumvit (Chon Buri) Branch Tel. +66 (0) 3879-6066, 3879-5639 Fax. +66 (0) 3827-7841
Suvarnabhumi Airport Sub Branch Tel. +66 (0) 2134-4085-8 Fax. +66 (0) 2134-4089
Nong Mon (Chon Buri) Branch Tel. +66 (0) 3874-5233, 3874-5739 Fax. +66 (0) 3874-6349
Thanon Samakkhi Sub Branch Tel. +66 (0) 2582-8146-8 Fax. +66 (0) 2997-6042
Na Kluea (Pattaya) Branch Tel. +66 (0) 3822-6058-61 Fax. +66 (0) 3822-6117
Bang Bua Thong Sub Branch Tel. +66 (0) 2571-7124, 2571-7142-3 Fax. +66 (0) 2920-9603
Thanon ChetChamNong (Chon Buri) Branch Tel. +66 (0) 3879-2203-5 Fax. +66 (0) 3879-2178
Phra Pathom Chedi Sub Branch Tel. +66 (0) 3425-4203-5, 3421-3541 Fax. +66 (0) 3425-9131
Sri Racha Branch Tel. +66 (0) 3877-1686 Fax. +66 (0) 3877-1690
Pak Nam Sub Branch Tel. +66 (0) 2173-7882-4 Fax. +66 (0) 2702-8037
Trat Branch Tel. +66 (0) 3953-1641-3 Fax. +66 (0) 3952-2662
CENTRAL REGION
Hua Hin Branch Tel. +66 (0) 3251-6663-6 Fax. +66 (0) 3253-2919
Kanchanaburi Branch Tel. +66 (0) 3451-8763, 3462-1566 Fax. +66 (0) 3451-8874 Kamphaeng Phet Branch Tel. +66 (0) 5572-0575, 5571-3325-6 Fax. +66 (0) 5571-3368 Chanthaburi Branch Tel. +66 (0) 3934-4323-6 Fax. +66 (0) 3934-4327
Phetchaburi Branch Tel. +66 (0) 3241-0505, 3241-0506, 3241-0514 Fax. +66 (0) 3240-0618 Big C Rayong Branch Tel. +66 (0) 3887-3094, 3887-3301, 3887-3302 Fax. +66 (0) 3862-2659
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
239
Rayong Branch Tel. +66 (0) 3886-4114 Fax. +66 (0) 3886-4115
Thanon Phraya Satcha (Chon Buri) Sub Branch Tel. +66 (0) 3879-2214-5, 3879-3317 Fax. +66 (0) 3879-2216
Ratchaburi Branch Tel. +66 (0) 3231-1203-5 Fax. +66 (0) 3231-1207
Tesco Lotus Pattaya Nuea Sub Branch
Lop Buri Branch Tel. +66 (0) 3661-8023, 3661-8083, 3661-8084 Fax. +66 (0) 3642-4846
Klaeng Sub Branch Tel. +66 (0) 3888-4503-5 Fax. +66 (0) 3888-4506
Samut Songkhram Branch Tel. +66 (0) 3472-0744, 3472-0148-9 Fax. +66 (0) 3471-6267 Samut Sakhon Branch Tel. +66 (0) 3482-0359-60, 3482-0365-6 Fax. +66 (0) 3482-0445 Saraburi Branch Tel. +66 (0) 3631-7722 Fax. +66 (0) 3631-8069 Sing Buri Branch Tel. +66 (0) 3653-0410, 3653-0413, 3653-0432 Fax. +66 (0) 3651-2021 Suphan Tel. Fax.
Buri Branch +66 (0) 3552-5742, 3550-1237, 3550-1361 +66 (0) 3552-5743
Tel. Fax.
+66 (0) 3841-1410, 3841-1316 +66 (0) 3841-1423
Thanon Sut Banthat (Saraburi) Sub Branch Tel. +66 (0) 3631-4256-7, 3631-4512 Fax. +66 (0) 3631-5404 Rojana Industrial Park Ayutthaya Sub Branch Tel. +66 (0) 3571-9710-2 Fax. +66 (0) 3533-1651 Ayutthaya Park Sub Branch Tel. +66 (0) 3522-9560-2 Fax. +66 (0) 3522-9554
NORTHERN REGION Chiang Rai Branch Tel. +66 (0) 5374-5244-6 Fax. +66 (0) 5374-5247 Thanon Chang Chlan (Chiang Mai) Branch
Phra Nakhon Si Ayutthaya Branch Tel. Fax.
+66 (0) 3523-5611 +66 (0) 3523-5630
Laem Chabang Sub Branch Tel. +66 (0) 3849-0230, 3849-1921-2 Fax. +66 (0) 3849-1924 HomeWorks Pattaya Tai Sub Branch Tel. Fax.
240
+66 (0) 3837-4270, 3837-6276, 3837-4273 +66 (0) 3837-4463
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Tel. Fax.
+66 (0) 5382-0538-41 +66 (0) 5382-0543
Tha Phae Branch Tel. +66 (0) 5323-5755 Fax. +66 (0) 5323-5757 Nakhon Sawan Branch Tel. +66 (0) 5631-3848, 5622-5444 Fax. +66 (0) 5631-3850
Phitsanulok Branch Tel. +66 (0) 5530-4313, 5521-8650 Fax. +66 (0) 5530-4279, 5521-8648
Thanon Nimmanhemin Sub Branch
Phichit Tel. Fax.
Thanon Chang Phueak (Chiang Mai) Sub Branch Tel. +66 (0) 5323-1060, 5431-2116-7, 5341-2033 Fax. +66 (0) 5323-1061
Branch +66 (0) 5665-1214, 5665-1215, 5665-1216 +66 (0) 5661-5858
Tel. Fax.
+66 (0) 5322-5463, 5340-0672-4 +66 (0) 5340-0675
Phetchabun Branch Tel. +66 (0) 5674-4076-8 Fax. +66 (0) 5672-2217
Talat Varorot Sub Branch Tel. +66 (0) 5387-4002 Fax. +66 (0) 5387-4006
Tesco Lotus Phitsanulok Branch Tel. +66 (0) 5537-7254, 5537-7256, 5537-7287 Fax. +66 (0) 5537-7356
Central Airport Chiang Mai Sub Branch Tel. +66 (0) 5320-1234 Fax. +66 (0) 5320-1900
Phrae Branch Tel. +66 (0) 5462-6811, 5462-6931, 5462-6962 Fax. +66 (0) 5453-2837 Lampang Branch Tel. +66 (0) 5431-8927-30 Fax. +66 (0) 5431-8960 Sukhothai Branch Tel. +66 (0) 5561-6022, 5562-2464-6 Fax. +66 (0) 5562-2469 Uttaradit Branch Tel. +66 (0) 5544-1777, 5544-2240, 5544-2294 Fax. +66 (0) 5541-4096 Thanon Phahon Yothin (Chiang Rai) Sub Branch Tel. Fax.
+66 (0) 5371-6433, 5371-6979, 5371-8394 +66 (0) 5375-2811
Thanon Kosi (Nakhon Sawan) Sub Branch Tel. +66 (0) 5631-3929-31 Fax. +66 (0) 5631-3932 Thanon Barom Trai Lokanart 2 (Phitsanulok) Sub Branch Tel. +66 (0) 5521-7864-7 Fax. +66 (0) 5521-8648
NORTH EASTERN REGION Kalasin Branch Tel. +66 (0) 4382-1080-1, 4382-1420 Fax. +66 (0) 4381-6584 Khon Kaen Branch Tel. Fax.
+66 (0) 4332-4321, 4322-6888 +66 (0) 4332-5919
Tesco Lotus Chaiyaphum Branch Tel. +66 (0) 4483-8324-6 Fax. +66 (0) 4481-3352
McCormick Hospital (Chiang Mai) Sub Branch Nakhon Phanom Branch Tel. +66 (0) 5326-1218-9, 5330-0421 Tel. +66 (0) 4251-4500 Fax. +66 (0) 5326-1123 Fax. +66 (0) 4251-4501
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
241
Nakhon Ratchasima Branch Tel. +66 (0) 4426-9797 Fax. +66 (0) 4426-9790
Thanon Klang Mueang (Khon Kaen) Sub Branch Tel. Fax.
+66 (0) 4332-2630-1, 4322-8266 +66 (0) 4332-2386
Buri Ram Branch Tel. +66 (0) 4460-2573, 4462-5471, 4462-5476 Fax. +66 (0) 4460-2575
Thao Suranari Monument Sub Branch Tel. +66 (0) 4424-1774, 4424-1775 Fax. +66 (0) 4424-1776
Maha Sarakham Branch Tel. +66 (0) 4374-0681-3 Fax. +66 (0) 4372-2958
Pak Chong Sub Branch Tel. +66 (0) 4431-6866-9 Fax. +66 (0) 4431-6859
Big C Yasothon Branch Tel. +66 (0) 4572-4361, 4572-4376, 4572-4423 Fax. +66 (0) 4572-5067
Tesco Lotus Khorat Sub Branch Tel. +66 (0) 4426-3564-7 Fax. +66 (0) 4426-3565
Roi Et Branch Tel. +66 (0) 4352-3335-8 Fax. +66 (0) 4352-3339 Si Sa Ket Branch Tel. +66 (0) 4562-0500-2 Fax. +66 (0) 4564-4197 Sakon Nakhon Branch Tel. +66 (0) 4271-5767, 4273-6146-8 Fax. +66 (0) 4271-5686
Surin Plaza Sub Branch Tel. +66 (0) 4453-8517-20 Fax. +66 (0) 4453-8521 Thanon Pho Si (Udon Thani) Sub Branch Tel. +66 (0) 4234-3817-8 Fax. +66 (0) 4234-3727 Warin Chamrap Sub Branch Tel. +66 (0) 4532-5075, 4528-6171-3 Fax. +66 (0) 4532-5076
Surin Branch Tel. +66 (0) 4453-8517-20 Fax. +66 (0) 4453-8521
SOUTHERN REGION
Nong Khai Branch
Krabi Branch Tel. +66 (0) 7563-2838-40 Fax. +66 (0) 7563-2835
Tel. Fax.
+66 (0) 4246-0119-22 +66 (0) 4246-0199
Chumphon Branch Udon Thani Branch Tel. +66 (0) 4234-2550 Fax. +66 (0) 4234-2398 Ubon Ratchathani Branch Tel. +66 (0) 4528-4272 Fax. +66 (0) 4528-4273
242
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Tel. Fax.
+66 (0) 7750-5051-3 +66 (0) 7751-5054
Trang Branch Tel. +66 (0) 7522-3240-3 Fax. +66 (0) 7522-3244
Nakhon Si Thammarat Branch Tel. +66 (0) 7532-2689 Fax. +66 (0) 7532-2144 Big C Pattani Branch Tel. +66 (0) 7333-8004, 7331-3982-3 Fax. +66 (0) 7333-8005 Phatthalung Branch Tel. +66 (0) 7462-6952-4 Fax. +66 (0) 7461-5451 Si Yaek Tha Ruea (Phuket) Branch Tel. +66 (0) 7661-7097-8, 7627-2274 Fax. +66 (0) 7661-7095 Thanon Ratsada Phuket Branch Tel. +66 (0) 7621-9664, 7625-6873-5 Fax. +66 (0) 7621-9731 Phuket Branch Tel. +66 (0) 7626-1570-5 Fax. +66 (0) 7626-1576 Hat Yai Branch Tel. +66 (0) 7435-4690 Fax. +66 (0) 7435-4696 Surat Thani Branch Tel. +66 (0) 7721-3551-7 Fax. +66 (0) 7721-3560 Tesco Lotus Krabi Sub Branch Tel. +66 (0) 7565-0833, 7565-0836-7 Fax. +66 (0) 7565-0834
Ha Yaek Tel. Fax.
Chalong (Phuket) Sub Branch +66 (0) 7638-3222, 7638-3431, 7628-2512 +66 (0) 7638-3348
Patong Sub Branch Tel. +66 (0) 7629-0585-7 Fax. +66 (0) 7629-0588 Thanon Montri (Phuket) Sub Branch Tel. +66 (0) 7623-0203-5 Fax. +66 (0) 7623-0209 Central Festival Phuket Sub Branch Tel. +66 (0) 7620-9290 Fax. +66 (0) 7620-9291 Thanon Ratthakan (Hat Yai) Sub Branch Tel. +66 (0) 7434-9070-2, 7421-6751 Fax. +66 (0) 7426-1752 Diana Si Phuwanart Sub Branch Tel. +66 (0) 7446-5316-8 Fax. +66 (0) 7446-5319 Songkhla Sub Branch Tel. +66 (0) 7444-1198-9 Fax. +66 (0) 7444-1233 Thanon Chuti Uthit (Hat Yai) Sub Branch Tel. +66 (0) 7434-6396-8 Fax. +66 (0) 7434-6393 Thanon Si Wichai (Surat Thani) Sub Branch Tel. +66 (0) 7720-6488, 7726-4170-1 Fax. +66 (0) 7720-6671
Tha Wang (Nakhon Si Thammarat) Sub Branch
Hat Chaweng (Ko Samui) Sub Branch
Tel. Fax.
Tel. Fax.
+66 (0) 7531-3144-6 +66 (0) 7535-7067
Thung Song Sub Branch Tel. +66 (0) 7541-3003-6 Fax. +66 (0) 7541-3007
+66 (0) 7723-3267-9 +66 (0) 7723-3276
Na Thon (Ko Samui) Sub Branch Tel. +66 (0) 7723-6611-3 Fax. +66 (0) 7723-6611
Khok kloi (Phang Nga) Sub Branch Tel. +66 (0) 7643-4821-4 Fax. +66 (0) 7643-4827 ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
243
related party transactions
All of the related party transactions between Thanachart Bank Public Company Limited and related parties are of normal business transactions, proceeding according to the business plan under fair price and term and condition as general public. Those transactions have been approved under transparent procedures in compliance with the relevant regulations. Related parties of Thanachart Bank refer to person or entity with control over the Bank or being directly or indirectly controlled by the Bank or under the same control as the Bank. Moreover, these include the person who has significant influence on the Bank, including key management, directors or employees of the Bank who have authority in planning and controlling the Bank’s operations. As of 31 December 2008, the Bank had the related party transactions with the parent company,
its subsidiaries and its related parties whereby these transactions can be summarized as follows: Loans and contingent liabilities As at 31 December 2008 and 2007, the Bank and its subsidiaries had the following related party transactions with executives of the Bank from the level of department manager and above. These transactions can be summarized as follows: (Unit: Million Baht)
CONSOLIDATED FINANCIAL STATEMENTS
31 december 2008
Loans Deposits
244
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
31 december 2007
separate financial statements
31 december 2008
31 december 2007
67
48
67
48
496
399
496
399
significant financial information
The significant financial information between the companies and related parties, as at 31 December 2008, can be summarized as follows: (Unit: Million Baht)
For the year ended 31 December Consolidated financial statements 2008
2007
separate financial statements 2008
transfer pricing policy (for the year 2008)
2007
Transactions occurred during the year Parent company 28,443 5,231 - - At market price Sales of debt securities - 346 - - Sale of investment in an associated company (gain of 7 million baht) 294 1,278 287 1,275 At interest rate of 3.42 - 5.25 Interest incomes percent per annum 134 170 134 170 At the rate agreed under the contract, Incomes on supporting service determined with reference to cost 46 19 - - Other incomes 275 230 256 199 At interest rate of 1.75 - 4.125 and Interest expenses 6.18 percent per annum 151 128 128 117 At the rate agreed under the rental Rental expenses contract 20 50 20 50 Other expenses 559 217 559 217 As declared Dividend payment - 223 - 223 Purchase of fixed assets Subsidiary companies 44,703 12,062 2,878 1,797 At market price Purchase of debt securities 44,781 17,805 512 9,040 At market price Sales of debt securities (2008: gain of 12 million baht in consolidated financial statements and gain of 5 million baht in separate financial statements 2007: gain of 62 million baht in consolidated financial statements and gain of 61 million baht in separate financial statements) - - 431 - At net book value of subsidiary Purchase of investment in subsidiary company company/at par value of ordinary share - 1 - 3 Sales of fixed assets - 38 408 111 At interest rate of 3.61 - 4.75 percent Interest and dividend income per annum and dividend as declared - 66 146 137 At the rate agreed under the contract, Incomes on supporting services determined with reference to cost - 58 285 158 Other incomes - 28 53 51 At interest rate of 1.0 - 4.875 Interest expenses percent per annum - 1 2 6 At the rate agreed under the rental Rental expenses contract - 96 221 241 Other expenses - - 4 - Contract rate, determined with Purchase of fixed assets reference to appraisal value and book value
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
245
(Unit: Million Baht)
For the year ended 31 December Consolidated financial statements 2008
2007
separate financial statements 2008
transfer pricing policy (for the year 2008)
2007
Associated company Interest incomes 3 5 3 5 At interest rate of 3.4 - 4.3 percent per annum Other incomes 3 4 - - Interest expenses 2 4 2 4 At interest rate of 1.75 - 2.75 percent per annum Rental expenses 21 16 21 16 At the rate agreed under the rental contract Other expenses 1 - - - Related companies Purchase of investment 21,047 - 1,226 - At market price debt securities Sales of investment in debt 21,580 6,116 607 52 At market price securities (2008: gain of 13 million baht in consolidated financial statements and gain of 12 million baht in separate financial statements) (2007: loss of 1 million baht in consolidated and separate financial statements) Sales of loans 8 - 8 - At the rate agreed under the contract (2008: gain of 2 million baht in consolidated and separate financial statements) Transfer of loans and receivables - 824 - 824 Transfer of deposits - 53 - 53 Purchase of fixed assets - 197 - 197 Interest and dividend incomes 361 519 333 504 At interest rate of 0.50, 0.75 and 1.60 - 8.50 percent per annum and dividends as declared Incomes on supporting services 9 13 9 13 At the rate agreed under the contract, determined with reference to cost Loss on financial derivatives 36 - 36 - At market price contracts Other incomes 37 49 - - Interest expenses 71 88 69 88 At interest rate of 1.0 - 4.85 and 9.0 percent per annum Rental expenses 38 27 15 12 At the rate agreed under the rental contract Other expenses 47 32 30 28 Dividend payment 186 - 186 - As declared
246
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Outstanding balance of related party transactions
The outstanding balances of the above transactions during the years ended 31 December 2008 and 2007 have been shown at the average balance at the end of each month. Details are as follows: (Unit: Million Baht)
Consolidated financial statements 2008
2007
Separate financial statements 2008
2007
Parent company Loans 7,589 25,126 7,385 25,061 Deposits 700 623 700 623 Borrowings 4,651 4,204 4,277 3,062 Subsidiary companies Loans - 1,369 4,525 2,494 Deposits - 529 565 498 Interbank and money market items (liabilities) - 277 344 275 Borrowings - 650 714 619 Associated company Investment in debt securities 206 155 206 155 Loans 87 596 48 - Deposits 56 34 56 34 Related companies Interbank and money market items (assets) 4,383 4,874 4,271 4,560 Investment in debt securities 842 866 578 607 Loans 4,962 9,361 4,695 9,203 Deposits 1,403 1,410 1,403 1,410 Interbank and money market items (liabilities) 447 31 402 31 Borrowings 410 870 400 870
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
247
The significant outstanding balances of the above transactions can be summarized as follows: (Unit: Million Baht) consolidated financial statements 31 december 2008
Interbank and money Investment in debt market securities Loans items
Contingent liabilities
Liabilities
Assets
Interest receivables
Other assets
Interbank and money market Interest items Borrowings payables Deposits
Other liabilities
Parent company Thanachart Capital Plc.
-
257
4,512
2
29
166
-
6,372
13
14
-
Associated company MBK Plc.
-
-
-
-
7
65
-
-
-
-
64
Related companies NFS Asset Management Co., Ltd.
-
-
3,859
-
2
23
-
-
-
-
-
Advanced Info Service Plc.
-
714
43
12
10
32
-
-
-
6
-
The Bank of Nova Scotia
7,751
-
-
-
3
-
8
-
-
4 1,194
Other related companies
-
-
146
1
19
814
94
212
11
7,751
971
8,560
15
70
1,100
102
6,584
24
1
58
25 1,316
(Unit: Million Baht) consolidated financial statements 31 december 2007
Interbank and money Investment in debt market securities Loans items
Contingent liabilities
Liabilities
Assets
Interest receivables
Other assets
Interbank and money market Interest items Borrowings payables Deposits
Other liabilities
Parent company Thanachart Capital Plc.
-
95
12,542
1
20
136
-
4,915
16
11
-
Associated company MBK Plc.
-
271
-
5
6
13
-
-
-
-
56
Related companies NFS Asset Management Co., Ltd.
-
-
4,425
-
-
65
-
-
-
-
-
Advanced Info Service Plc.
-
700
31
11
24
987
-
-
-
4
-
8,903
-
-
-
-
-
7
-
-
-
-
317
169
-
1
-
-
-
-
-
-
7,452
The Bank of Nova Scotia Siam Commercial Bank Plc. Siam City Bank Plc. Other related companies
52
-
-
-
-
-
-
750
3
-
-
-
35
613
3
14
951
14
148
6
27
102
9,272
1,270
17,611
21
64
2,152
21
5,813
25
42
7,610
248
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
(Unit: Million Baht) separate financial statements 31 december 2008
Interbank and money Investment in debt market securities Loans items
Contingent liabilities
Liabilities
Assets
Interest receivables
Other assets
Interbank and money market Interest items Borrowings payables Deposits
Other liabilities
Parent company Thanachart Capital Plc.
-
-
4,500
-
22
166
-
6,250
13
11
-
Subsidiary companies Thanachart Group Leasing Co., Ltd.
-
-
3,645
12
1
19
-
-
-
-
-
T Leasing Co., Ltd.
-
-
824
3
1
24
-
-
-
-
-
Thanachart Securities Plc.
-
-
-
-
2
-
418
-
-
-
-
-
-
-
-
12
285
-
170
3
2
-
Co., Ltd.
-
-
-
-
11
-
403
1,090
11
31
-
National Leasing Co., Ltd.
-
-
-
-
-
5
-
-
-
61
-
Thanachart Broker Co., Ltd.
-
-
-
-
-
327
-
-
-
-
-
-
-
-
-
-
10
-
-
-
-
-
-
-
-
-
-
41
-
-
-
1
-
-
-
-
-
-
10
-
-
-
-
-
-
-
-
-
2
-
8
-
-
-
-
Thanachart Insurance Co., Ltd. Thanachart Life Assurance
Thanachart Legal and Appraisal Co., Ltd. Thanachart Training and Development Co., Ltd. Thanachart Management and Services Co., Ltd. Thanachart Fund Management Co., Ltd.
Associated company MBK Plc.
-
-
-
-
7
65
-
-
-
-
64
Related companies NFS Asset Management Co., Ltd.
-
-
3,650
-
-
23
-
-
-
-
-
Advance Info Service Plc.
-
451
40
8
-
32
-
-
-
4
-
The Bank of Nova Scotia
7,751
-
-
-
3
-
8
-
-
4 1,194
Other related companies
-
-
140
1
11
814
93
212
11
451 12,799
24
72
1,821
930
7,722
38
7,751
-
58
114 1,316
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
249
(Unit: Million Baht) separate financial statements 31 december 2007
Interbank and money Investment in debt market securities Loans items
Contingent liabilities
Liabilities
Assets
Interest receivables
Other assets
Interbank and money market Interest items Borrowings payables Deposits
Other liabilities
Parent company Thanachart Capital Plc.
-
-
12,500
-
15
136
-
3,800
13
10
-
Subsidiary companies Thanachart Group Leasing Co., Ltd.
-
-
4,000
-
-
52
-
-
-
-
-
T Leasing Co., Ltd.
-
-
294
1
-
45
-
-
-
-
-
Thanachart Securities Plc.
-
-
-
-
1
-
62
-
-
-
-
-
-
-
-
7
174
-
-
-
-
-
-
-
-
-
18
-
37
870
13
-
-
Thanachart Insurance Co., Ltd. Thanachart Life Assurance Co., Ltd. National Leasing Co., Ltd.
-
-
-
-
-
6
-
-
-
54
-
Thanachart Broker Co., Ltd.
-
-
-
-
-
154
-
-
-
-
-
-
-
-
-
-
13
-
-
-
-
-
-
-
-
-
-
18
-
-
-
6
-
-
-
-
-
1
10
-
-
-
8
-
-
-
-
-
2
-
5
-
-
-
-
Thanachart Legal and Appraisal Co., Ltd. Thanachart Training and Development Co., Ltd. Thanachart Management and Services Co., Ltd. Thanachart Fund Management Co., Ltd.
Associated company MBK Plc.
-
271
-
5
6
13
-
-
-
-
56
Related companies NFS Asset Management Co., Ltd.
-
-
4,250
-
-
65
-
-
-
-
-
Advance Info Service Plc.
-
450
24
8
-
987
-
-
-
4
-
8,903
-
-
-
-
-
7
-
-
-
-
8
169
-
1
-
-
-
-
-
-
7,452
The Bank of Nova Scotia Siam Commercial Bank Plc. Siam City Bank Plc. Other related companies
46
-
-
-
-
-
-
750
3
-
-
-
22
597
2
2
951
14
148
6
-
102
8,957
912
21,665
17
52
2,624
125
5,568
35
82
7,610
250
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
As of 31 December 2008, the Bank has loans to parent, subsidiary and related companies within Thanachart Group. Details can be summarized as follows: (Unit: Million Baht) Transaction
Related party
types/
transactions
Rationale of the
(Outstanding
transactions and transfer
balance)
pricing policy
Related companies/Relationship
Contract
with the company
period
Interest rate
Parent company Thanachart Capital Plc.
Promissory
Financial cost
Shareholding
note at call
of Thanachart
- Hold 74.92 percent stake in Thanachart Bank within Related directors Mr. Banterng
Tantivit
Mr. Suphadej
Poonpipat
4,500
Bank plus
December
a fixed interest
2009
rate per annum
Miss Suvarnapha Suvarnaprathip Relationship - Directors and executives of Thanachart Bank - Have authority in Thanachart Capital Plc.
- Do not hold shares in Thanachart Capital Plc.
A transaction arose from
Thanachart Group’s business restructuring according to “One
Subsidiary company Thanachart Group Leasing Co., Ltd.
Promissory
According to
3,645
Shareholding
note at call
money market
Bank will eventually become the
- Thanachart Bank holds 100 percent stake in
but no less than
only one financial institution
Thanachart Group Leasing Co., Ltd.
1-year fixed
in Thanachart Group.
Related directors
deposit rate plus
Presence” Policy that Thanachart
Loans provide to companies
Mr. Bundit
Cheevadhanarak
a fixed interest
within Thanachart Group will be
Mr. Anuchart
Deeprasert
rate per annum
used in each company’s normal
Mr. Yongyuth
Asavasuwarnsutee
business operation.
Mr. Pichet
Chareonjit
Mr. Pompetch
Rasanon
is the entity who assesses and
Mr. Songwuth
Chaowalit
approves of these transactions.
Mr. Somkuan
Chaicharoen
The approval from orderly
Mr. Mongkol
Peanpitakkit
authority of committees concerned
Mr. Sarut
Tharatornchanakul
is required beforehand with the
Mr. Eakawit
Pusuwan
persons having a conflict of
The Bank’s Board of Directors
Relationship
interests not participating in the
- Management of Thanachart Bank
approving process.
- Have authority in Thanachart Group
Leasing Co., Ltd.
terms and conditions of the
- Do not hold shares in Thanachart Group
transaction are determined on
Leasing Co., Ltd.
the identical basis as normal
Interest rate charged including
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
251
(Unit: Million Baht) Transaction
Related party
types/
transactions
Rationale of the
Related companies/Relationship
Contract
(Outstanding
transactions and transfer
with the company
period
balance)
pricing policy
Interest rate
T Leasing Co., Ltd. (formerly known as
Promissory
According to
Thanachart Leasing 2000 Co., Ltd.)
note at call
824
business in which the price is
money market
comparable to regular customers
Shareholding
but no less than
with the same risk exposure.
- Thanachart Bank indirectly holds the stake
1-year fixed
The credit line is within the limit
in T Leasing Co., Ltd. through holding
deposit rate plus
approved by the Bank of Thailand.
a fixed interest
100 percent stake in Thanachart Group Leasing Co., Ltd.
rate per annum
Related directors Mr. Bundit
Cheevadhanarak
Mr. Anuchart
Deeprasert
Mr. Thanes
Ratanakorn
Mr. Wichak
Praditavanij
Mr. Chatchai
Kaivalkul
Mr. Sanong
Khumnuch
Mr. Mongkol
Peanpitakkit
Mr. Seth
Cechetto
Relationship - Management of Thanachart Bank - Have authority in T Leasing Co., Ltd. - Do not hold shares in T Leasing Co., Ltd. Related company NFS Asset Management Co., Ltd.
Promissory
Financial cost
Shareholding
note at call
of Thanachart
- Thanachart Capital Plc. holds 100 percent
within
Bank plus
stake in NFS Asset Management Co., Ltd.
December
a fixed interest
Related director
2009
rate per annum
3,650
None Relationship Same parent company
As at 31 December 2008, the Bank and its subsidiaries have investments in ordinary shares of related companies whereby the management of the Bank and subsidiaries are shareholders and/or co-directors,
a total of 220 million baht (Separate financial statements: 62 million baht) (2007: 233 million baht
in consolidated financial statements and 62 million baht in separate financial statements). Support services among companies within Thanachart Group Thanachart Group has employed the policy of combining supporting units into one company to provide services to other companies within the Group. Its objective is to attain the economy of scale and the economy
of scope, as well as to maximize the use of resources. The service fees are calculated on the cost plus basis.
The services provided are as follows: Thanachart Bank Public Company Limited Provides the services, in operation, business control, debt and payment collection agent, accounting, e-commerce business, work system and regulatory development, internal audit, compliance, human resource, information technology system, hire purchase credit review, building and premises management, procurement and asset management. 252
ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
Thanachart Management and Service Company Limited Provides accommodations for service - support employees. Thanachart Legal and Appraisal Company Limited Provides the services in legal counseling, legal contracts, lawsuit prosecution and execution, and collateral appraisal. Thanachart Training and Development Company Limited Provides training to employees of the companies within Thanachart Group. Loans to and contingent liabilities for executives of the Bank and companies of Thanachart Group from the level of department manager and above, including other transactions as mentioned above The transactions are of normal business. Procedures in approving related party transactions The Bank has policy and regulations to prevent the conflict of interests and related party transactions specified under the Rules of the Stock Exchange of Thailand. This has become the company’s regulations and shall be complied by the employees and the management for transactions between the Bank and persons who may have conflict of interest as specified under Rules and Regulations of the Office of Securities and Exchange Commission. Any transactions between the Bank and related parties shall be proceeded under the same criteria as any customers and counterparty, including complied with the process as deemed appropriate and necessary
in order to support the operations of the Bank. Moreover, to prevent the conflict of interest the related party transactions shall be priced with an appropriate fair price and complied with regulations whereby the benefits of the Bank and its shareholders have been placed a great emphasis. During the approval of the related party transactions, any related directors or employees shall not participate in approving loans or investments in the business where the Bank or directors or executives of the Bank have interest, or provide loans to shareholders or executives of the Bank. Such transactions shall be approved by the Board of Directors with consensus. The directors or executives of the Bank who have a conflict of interest shall not participate in the approval process whereby the approval shall be conducted within the authority and limit specified by the Bank and under the regulations. For the following transactions, loans or investment, payment, transfer of tangible assets/fixed assets and the purchase/sale of securities, related party transactions and the purchase or sale of assets, these transactions shall be proceeded cautiously in order to avoid any conflict of interest and shall complied with the rules and regulations. Moreover, such transactions shall be disclosed according to the accounting standard and the Bank’s regulations. future Policy and trend of related party transactions All related party transactions between the Bank and other companies in Thanachart Group or related parties are of normal business operation. Moreover, Thanachart Group focuses on operating according to the financial institution business restructuring plan, the One Presence Policy and Consolidated Supervision, including provides related benefit supports to other companies within Thanachart Group whereby the Bank has the policy to prevent those who have related benefit from participating in this sort of transactions. ANNUAL REPORT 2008 THANACHART BANK PUBLIC COMPANY LIMITED
253