Krungsri (Bank of Ayudhya PCL and its business units), a member of Mitsubishi UFJ Financial Group (MUFG), one of the world's largest financial groups, is focused on creating a sustainable future for the Bank, and its partners and customers as it enters the last year of the 2021-2023 Medium-Term Business Plan (MTBP). This year, Krungsri strives to reinforce its aim of "Being the Preferred Thai Bank Connecting Customers' Needs across ASEAN" by focusing on three key areas: ASEAN-Linked Business - connecting businesses across ASEAN through innovative financial services; ESG-Linked Business - becoming the most sustainable commercial bank in Thailand and a leader in ESG finance; and Digital & Innovation - continuing to innovate new digital services and products for the benefit of people in Thailand and ASEAN.
Krungsri President and Chief Executive Officer Mr. Seiichiro Akita said, "As we enter the final year of our current Medium-Term Business Plan, we can look back on many successes. Enhanced ASEAN connectivity to key markets in the region, solid growth during the pandemic and building resilience towards recovery, and progress in our ambitions to deliver on our ESG commitment are key achievements during 2021-2022. We are confident this gives us a tremendous foundation to build on as we lead the way towards a sustainable future for all key stakeholders. This year will see us further enhance Krungsri's position in ASEAN, elevate our positioning on ESG, and continue to leverage our digital and innovation leadership to enable business growth."
While Thailand began its recovery from the global pandemic, Krungsri remained committed to proactively assisting their customers impacted by Covid-19 challenges and provided more than 150 billion Baht in business and household loans and more than 16 billion Baht in SME business loans to support recovery. Krungsri also recorded solid financial results during the year, with loans growing by 3.1% and recording profitability (NIM) of 3.45%.
During the first two years of current MTBP, Krungsri enhanced its strong ASEAN connections by expanding overseas businesses in The Philippines, Vietnam, and Indonesia, while Cambodia and Lao PDR maintained growth momentum. As a result, Krungsri acquired more than 150,000 new customers through its ecosystems and partnerships.
Expansion across ASEAN continued with partnerships with SB finance in The Philippines and SHB Finance in Vietnam while also improving connectivity between Indonesia, Singapore, and Cambodia. The status of Cambodia's Hattha Bank was also upgraded as it became a commercial bank. Overall, the Net Income contribution from ASEAN business increased from 3% in 2020 to 6% in 2022.
As a market leader in ESG finance, Krungsri continued to deliver on its ESG commitments as it moved towards its carbon neutrality vision. Successful Krungsri initiatives during the year included Krungsri x SET 'Care the whale', Zero food waste and become a member of RE100 Thailand Club or the Thai Renewable Energy Association.
Enhancing Krungsri's position in ASEAN
Building from its solid platform in the region, in 2023 Krungsri aims to integrate ASEAN entities under One Krungsri to create value for customers in Thailand and ASEAN. This will see key services such as remittances, offshore investments, advisory services, and services like credit cards become more connected to provide improved benefits for customers. The bank aims to boost its Net Income contribution from its ASEAN business to 10%.
Elevating Krungsri Positioning on ESG
With ambitions to be the most sustainable commercial bank in Thailand, Krungsri has announced that it aims to achieve net-zero Green House Gas (GHG) emissions of its own operations by 2030, and net-zero GHG of its finance portfolio by 2050. The bank will continue to move towards achieving its ESG goals in 2023 by supporting customers to adopt ESG via a variety of commercial and retail initiatives. In the commercial sector, these include increasing financing for energy-saving projects such as solar rooftops, EV chargers, and renewable energy. Green, social and sustainability- linked loans, and bonds are also being prioritized. On the retail side, EV auto financing, socially responsible lending, and ESG-related funds will be offered to consumers. Under Krungsri Carbon Neutrality Vision Declaration, the bank is determined to increase its social and sustainable finance portfolio by 50,000 - 100,000 million Baht by 2030.
Enabling business growth with Digital and Innovation
Continued investment in Krungsri's successful Digital and Innovation initiatives will see the bank increase support for ASEAN-wide connectivity by enhancing cross-border payments and remittances. In Thailand, the launch of the CBDC pilot for retail and wholesale customers will shape the future of digital payments. With expertise and readiness, Krungsri is one of just two banks selected by the Bank of Thailand to pilot this CBDC project for retail customers. Customer experience remains the priority for innovation, and Krungsri is aiming to align multiple mobile apps such as Krungsri Mobile App (KMA), UCHOOSE, and Go, to make life simpler for users. This is a long-term improvement roadmap for core applications to support the future of banking and continuously improve the security of apps and digital banking to ensure a secure digital environment.
To attract new talent and accelerate the development of Thailand's digital landscape in line with the country's Digital Economy goals, Krungsri is investing in an innovative workplace to attract the best IT talent in Thailand, and its regional expansion will create opportunities for international exposure for the best talent. A pilot Innovation Hub in Chiang Mai aims to reach local Tech talent and create an open space for people to share ideas and get an opportunity to work jointly with Krungsri's experts.
"This year will be a challenging year as major economies face the risk of recession. The effects of China's reopening remain unclear but demand for services is likely to grow faster than the demand for goods. In ASEAN, growth will slow to 4.9% in 2023 from 5.3% in 2022, but the bloc remains the fastest-growing region. In addition to Thailand, growth will hold up well in Vietnam, The Philippines, and Indonesia, driven by domestic demand and the recovery of international tourism, as well as free trade agreements including the RCEP, and FDI inflows. With our strategy, we hope to overcome these headwinds and take advantage of the opportunities available in ASEAN by adapting to changing needs and having the right solutions for our commercial and retail customers across the region," Mr. Akita added.
Krungsri expects its loan business to grow by 3-5% through 2023, while the targeted Net Interest Margin (NIM) is at 3.5%. It is expected that Non-Interest Income will remain flat, and the Non-Performing Loan (NPL) ratio will be around 2.5-2.6%.