ANNUAL REPORT 2016 Thanachart BANK Public Company Limited

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ANNUAL REPORT 2016 Thanachart BANK Public Company Limited ANNUAL REPORT 2016 THANACHART BANK PUBLIC COMPANY LIMITED LONG LIVE THE KING The management and staff of Thanachart Bank Public Company Limited and its subsidiaries CONTENTS 005 Vision and Mission 006 Financial Highlights 018 Message from the Board of Directors 022 Board of Directors Thanachart Bank Public Company Limited 024 Management Discussion and Analysis 039 Nature of Business Operations 058 Risk Factors 070 Corporate Social Responsibility (CSR) 082 Corporate Governance 094 Internal Control and Risk Management 096 Report of the Nomination and Remuneration Committee 097 Management Structures 105 Board of Directors and Management Team 130 General Information 137 Shareholders and Dividend Payment Policy 140 Responsibilities of the Board of Directors for the Financial Report 141 Report of the Audit Committee 143 Independent Auditor’s Report 145 Financial Statements and Note to Financial Statements 291 Branches of TBANK 306 Summary of Specified Items per Form 56-2 in 2016 Annual Report “Investors can learn more on the issuing company’s annual statement (Form 56-1) shown in www.sec.or.th or the Bank’s website: www.thanachartbank.co.th FOUR Strategic Intents for the BUsiness Operation in 2016 To attract and retain customers by offering excellent services, innovative savings 1 and investment products. To ensure our customers succeed financially by helping them choose the right insurance and protection 2 products from across the entire Thanachart Group. To provide borrowing solutions to all customer segments that meet their current and future needs and 3 help them to become financially better off. To provide digital banking solutions that permit customers to bank where they want, when they want, 4 and how they want. Vision of Thanachart GroUP Three Items for the BUsiness To be the best at providing fully PhilosophY integrated solution to our customers’ 1. Belief in our employees: Thanachart Group believes that complete financial needs by offering employees are the most valuable assets. Thanachart Group the highest quality products, services, owes its growth to the contribution of its employees and advice through competence and integrity. 2. Dedicate to excellence: Thanachart Group earnestly focuses on excellence. We are constantly evolving and adapting to the rapid pace of technological change through innovation. 3. Concern for social responsibility: Thanachart Group has a strong sense of responsibility towards the society. Financial highlights As at and for the year ended 31 December Consolidated Financial Statements Separate Financial Statements 2016 2015 2014 2013 2012 2016 2015 2014 2013 2012 Operating results (THB million) Interest income 44,886 48,217 52,445 53,879 48,736 41,843 45,125 49,102 50,542 46,331 Interest expenses 16,174 20,536 24,884 27,290 25,556 15,295 19,572 23,920 26,489 25,371 Net interest income 28,712 27,681 27,561 26,589 23,180 26,548 25,553 25,182 24,053 20,959 Non-interest income 11,694 11,957 11,750 24,948 12,098 8,960 10,441 8,643 22,079 10,902 Total income(1) 40,406 39,638 39,311 51,537 35,277 35,508 35,994 33,825 46,132 31,861 Non-interest expenses 20,626 19,721 19,515 20,408 21,660 17,843 17,096 17,029 17,692 19,522 Bad debt and doubtful accounts(2) 6,251 8,592 7,122 11,497 2,980 5,808 8,007 7,181 11,110 4,680 Net income(3) 12,434 10,743 9,922 15,385 8,354 11,962 11,452 7,918 14,113 6,855 Operating performance Basic earnings per share (THB) 2.05 1.90 1.80 2.79 1.52 1.97 2.03 1.44 2.56 1.24 Return on average assets (ROAA) (Percent) 1.29 1.11 0.98 1.51 0.90 1.31 1.24 0.82 1.46 0.78 Return on average equity (ROAE) (Percent) 10.27 9.83 9.93 16.99 10.72 10.64 11.39 8.60 16.91 9.55 Interest spread(4) (Percent) 3.03 2.84 2.68 2.62 2.48 3.02 2.83 2.66 2.66 2.58 Cost to income ratio net insurance premium income(5) (Percent) 51.05 49.75 49.64 39.60 61.40 50.25 47.50 50.34 38.35 61.27 Statement of financial position (THB million) Loans 690,907 713,446 754,370 790,017 754,063 651,613 676,001 714,436 750,494 723,023 Total assets 950,511 980,972 1,008,890 1,038,349 1,018,620 906,868 938,834 967,216 990,724 953,209 Deposits and borrowings 725,966 741,145 787,189 811,308 776,521 712,329 726,002 773,578 799,186 769,677 Total liabilities 824,391 863,281 902,726 941,109 934,435 791,283 830,784 871,614 901,572 875,708 Shareholders’ equity(6) 124,488 116,226 104,977 96,218 83,330 115,585 108,050 95,602 89,152 77,501 Definition and Formula (1) Total income = Net interest income + Non-interest income (2) Including loss on debt restructuring (3) Excluding non-controlling interest (4) Interest spread = Yield - Cost of fund Yield = Interest income / Average earning assets Earning assets = Interbank and money market from interest bearing + net investment + loans Cost of fund = Interest expenses / Average paying liabilities Paying liabilities = Total deposits + interbank and money market from interest bearing + total borrowings (5) Cost to income ratio = Non-interest expenses / Total income (6) Excluding non-controlling interest 006 ANNUAL REPORT 2016 As at and for the year ended 31 December Consolidated Financial Statements Separate Financial Statements 2016 2015 2014 2013 2012 2016 2015 2014 2013 2012 Asset quality Loans to deposits and borrowings ratio (Percent) 95.17 96.27 95.83 97.38 97.11 91.48 93.11 92.35 93.91 93.94 NPL-gross to total loans (Percent) 2.29 2.84 4.09 4.36 4.17 1.90 2.20 2.97 3.07 2.65 NPL-net to total loans (Percent) 1.07 1.26 2.02 2.25 2.05 1.05 1.15 1.61 1.66 1.35 Coverage ratio (Percent) 151.16 119.42 85.52 83.36 73.65 151.64 127.41 90.64 89.18 78.02 Total allowance to BOT regulation (Percent) 192.38 159.33 133.38 127.87 124.50 202.23 171.94 138.16 138.38 134.94 Non-performing loans (NPL) (THB million) 16,434 21,681 32,761 36,377 33,047 12,893 15,986 22,595 24,394 20,036 Capital measures Tier I capital ratio (Percent) 13.27 12.04 10.70 9.47 8.49 Total capital ratio (Percent) 19.15 17.92 15.83 14.80 13.99 Risk weighted assets (THB million) 682,373 682,245 724,209 747,992 724,801 Common share information Common shares outstanding (Million shares) - Average-basic 6,065 5,641 5,514 5,514 5,514 6,065 5,641 5,514 5,514 5,514 - End of period 6,065 6,065 5,514 5,514 5,514 6,065 6,065 5,514 5,514 5,514 Book value (THB) 20.80 19.41 19.25 17.64 15.11 19.06 17.82 17.34 16.17 14.06 Dividends per share (THB) 0.35 0.62 0.45 0.45 0.37 Other information Employees 14,553 14,719 14,806 15,358 15,765 12,305 12,468 12,676 13,286 13,642 Branches 592 614 617 621 630 Exchange booth 45 49 51 54 55 Thanachart bank PUblic companY limited 007 Deliver the highest possible level of customer experience, with a touch of digital, and always be available to assist customers as their professional financial advisor. Offer a comprehensive line of products and services to customers that can be accessed and tracked quickly and easily on their mobile devices anywhere and anytime. Equip our people with the tools to be more skilled and effective, through maximizing our understanding of customer expectations and needs, and strengthening our capabilities to provide the highest level of professional financial advice. Continuously innovate and stay ahead of the competition by leveraging visionary and fully integrated technology that is convenient, easily accessible, and highly secure. Promote economic security to individuals, groups, organizations and society at large, where smart spending and saving habits with a sense of sharing and sustainability are instilled in individual’s minds while preserving and enriching Thai culture and national identity. Message from the Board of Directors (Mr. Banterng Tantivit) Chairman of the Board of Directors Dear Shareholders, In the past year, the Thai economy confronted both financial instruments (IFRS 9). Accordingly, the overall Thai global and domestic headwinds ranging from slow global banking industry continued to demonstrate strong financial economic recovery, sluggish growth of the Chinese economy, stability with high levels of capital adequacy and strong financial risk and political uncertainty in Europe, falling global coverage ratios. However, loan growth continued to show trade growth, weakening commodity prices to domestic lackluster momentum, placing downward pressure on the risk factors in terms of household and SMEs debts and profitability of Thai commercial banks. the impact of drought. Nonetheless, the Thai economy still showed stability and achieved a continuous expansion, mainly In response to the gradual economic recovery, underpinned by the tourism sector, Government budget we continued our strategy of focusing on maintaining disbursements relating to the local mega transportation and strong asset quality, efficiently managing cost of funds, water management infrastructure projects, and monetary and and increasing fee income from banking, securities, and fund fiscal stimuli.
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