ANNUAL REPORT 2009 KASIKORNBANKGROUP Management Report Mission KASIKORNBANKGROUP aims to be a strong Thai financial group that provides a variety of financial services of world-class quality responsive to serve customers’ needs by harmoniously combining technology and human resources so as to achieve optimal benefits to customers, shareholders, employees and the country. Vision KASIKORNBANKGROUP aims to be the strongest, the most innovative and the most proactive Thai financial group in serving customers. Value • Customer Satisfaction • Belief in Teamwork • Dedication to Professional and Ethical Conduct • Commitment to Discipline • Proactiveness 1 Annual Report 2009 FINANCIAL HIGHLIGHTS (CONSOLIDATED FINANCIAL STATEMENTS) As of or for the years ended December 31, 2009 2008 2007 2006 2005 COMMON SHARE INFORMATION Per share (Baht) • basic earnings 6.22 6.41 6.28 5.74 5.87 • book value 51.42 47.49 41.87 37.04 32.91 • dividends 2.50 2.00 2.00 1.75 1.25 Share price (Baht)1) • high 91.00 94.00 91.50 76.50 70.50 • low 40.25 38.50 51.50 49.75 50.00 • closing 85.00 45.00 87.00 61.50 70.00 Common shares outstanding • average basic (thousand share) 2,393,260 2,393,122 2,387,438 2,381,474 2,371,366 • end of year (thousand share) 2,393,260 2,393,260 2,388,202 2,382,147 2,373,294 Market capitalization (Million Baht) 203,427 107,697 207,774 146,502 166,131 VALUE MEASURES Price to earnings ratio (PER) 13.66 7.02 13.84 10.72 11.92 Price to book value ratio (PBV) 1.65 0.95 2.08 1.66 2.13 Dividend yield (based on closing share price) 2.94% 4.44% 2.30% 2.85% 1.79% Dividend payout Ratio 41.88% 32.33% 31.88% 30.55% 21.36% OPERATING RESULTS (Million Baht) Interest and dividend income 56,396 60,130 55,516 51,810 38,065 Interest expenses 13,021 17,694 18,085 17,197 7,283 Net income from interest and dividends 43,375 42,436 37,431 34,613 30,782 2) Bad debt and doubtful accounts 9,403 7,789 5,887 5,419 3,662 Non-interest income 27,283 22,590 18,897 14,155 12,302 Non-interest expenses 40,144 35,060 29,029 25,561 21,426 3) Total income 70,658 65,026 56,328 48,768 43,084 6) Net income 14,892 15,333 15,005 13,664 13,930 OPERATING MEASURES Net interest margin (NIM) 3.51% 3.97% 4.13% 4.10% 3.84% Net interest margin (NIM) (Excluding companies in MTGH group)9) 3.58% 3.97% 4.13% 4.10% 3.84% Non-interest income to average assets 2.05% 1.97% 1.96% 1.60% 1.48% Non-interest income to average assets (Excluding companies in MTGH group)9) 1.93% 1.97% 1.96% 1.60% 1.48% Non-interest income ratio 38.61% 34.74% 33.55% 29.03% 28.55% Non-interest income ratio (Excluding companies in MTGH group)9) 36.74% 34.74% 33.55% 29.03% 28.55% Efficiency ratio 56.81% 53.92% 51.54% 52.41% 49.73% Efficiency ratio (Excluding companies in MTGH group)9) 55.50% 53.92% 51.54% 52.41% 49.73% Return on average assets (ROA) 1.12% 1.33% 1.55% 1.54% 1.68% Return on average assets (ROA) (Excluding companies in MTGH group)9) 1.14% 1.33% 1.55% 1.54% 1.68% Return on average equity (ROE) 12.58% 14.35% 15.94% 16.43% 19.29% Number of employees 15,464 13,560 12,320 11,219 10,303 BALANCE SHEET INFORMATION (Million Baht) Loans 943,378 904,008 762,505 677,207 626,946 Allowance for doubtful accounts4) 34,045 29,772 25,852 32,993 37,439 Non-performing loans net (NPL net)5) 18,473 15,712 17,600 27,282 N/A Non-performing loans (NPL gross) 37,152 33,686 34,980 46,495 56,217 Total assets 1,358,532 1,304,045 994,518 935,509 837,309 Deposits 975,492 967,950 783,822 746,260 690,337 Total liabilities 1,226,576 1,190,383 894,522 847,271 759,193 Shareholders’ equity6) 123,066 113,662 99,995 88,238 78,114 Average assets 1,331,289 1,149,282 965,014 886,409 831,142 Average earning assets 1,234,014 1,066,974 907,383 844,867 802,289 Average shareholders’ equity6) 118,364 106,829 94,117 83,176 72,231 Risk weighted assets 1,004,092 949,832 769,952 687,638 653,636 BALANCE SHEET QUALITY MEASURES Loans to deposits ratio 96.71% 93.39% 97.28% 90.75% 90.82% Equity to risk weighted assets 12.26% 11.97% 12.99% 12.83% 11.95% Return on risk weighted assets 1.48% 1.61% 1.95% 1.99% 2.13% Tier 1 capital ratio 10.25% 9.84% 10.74% 10.46% 9.53% Total capital ratio 15.19% 15.05% 14.62% 14.74% 14.47% NPL net to loans7) 1.91% 1.47% 2.29% 4.14% N/A NPL gross to loans8) 3.76% 3.09% 4.45% 6.85% 8.88% Total allowance to loans 3.61% 3.29% 3.39% 4.87% 5.97% Total allowance to NPLs 91.64% 88.38% 73.91% 70.96% 66.60% NPLs after allowance (Million Baht) 3,107 3,914 9,128 13,502 18,778 Note The 31 December 2009 consolidated balance sheet included all items of assets and liabilities of MTGH group. The consolidated statement of income included 1 month operating result of MTGH group for the period ended 31 December 2009. 1) Local board / High-low share prices during the year 5) Non-performing loans net refer to the non-performing loan value, net of total allowances for doubtful accounts 2) Including loss on debt restructuring 6) Excluding minority interest 3) Total income = Net income from interest and dividends + Non-interest income 7) Loans used in calculation are loans to general customers and loans to financial institutions after allowance for doubtful account of non-performing loan 4) Including revaluation allowance for debt restructuring 8) Loans used in calculation are loans to general customers and loans to financial institutions 9) Companies in MTGH group consist of Muangthai Group Holding Co., Ltd., Muang Thai Life Assurance Co., Ltd. and Muangthai Broker Co., Ltd. 2 Management Report CONTENTS BOARD OF DIRECTORS’ REPORT 5 MANAGEMENT REPORT Management Report 7 Management Discussion and Analysis 9 1. Overview 2. Operating Performance and Financial Position Analysis 3. Operations of Core Businesses 4. Operations of Support Groups 5. KASIKORNBANK’s Investments in Subsidiaries and Associated Companies Risk Management and Risk Factors 48 1. Overall Risk Management 2. Risk Management 3. Capital Management FINANCIAL REPORTS Report of the Board of Directors’ Responsibilities for Financial Reports 63 Report of the Audit Committee 64 Audit Report of Certified Public Accountant 65 Financial Statements 66 Notes to the Financial Statements 75 Financial Summary 169 CORPORATE GOVERNANCE Corporate Governance Committee Report 175 Human Resources and Remuneration Committee Report 176 Corporate Governance 177 1. Rights of Shareholders 2. Equitable Treatment of Shareholders 3. Roles of Stakeholders 4. Disclosure and Transparency 5. Responsibilities of the Board of Directors Dividend Policy 210 Corporate Social Responsibility (CSR) Activities 211 Factors Affecting Investment Decisions 225 STRUCTURE Organization Chart 228 Board of Directors 230 Board of Directors and Executives 232 Directorship of KASIKORNBANK Directors and Executives in Subsidiaries, Associated and Related Companies 248 Changes in KASIKORNBANK Shares Held by Directors and Executives in 2009 249 Management Team 250 Investment of KASIKORNBANK in Other Companies 254 OTHER INFORMATION Reference Information 257 Major Shareholders 258 Awards and Commendations 259 KASIKORNBANKGROUP KASIKORNBANK 265 1. Domestic Branch 2. Foreign Exchange Booth 3. K-Safe Deposit Box Center 4. Signature Exclusive Center 5. Signature Corner 6. K-WePlan Branch 7. K-WePlan Center 8. Corporate Business Center 9. International Trade Service Office 10. SME Business Center 11. Overseas Office K Companies 291 SUMMARY OF SPECIFIED ITEMS PER FORM 56-2 293 3 Annual Report 2009 4 Management Report BOARD OF DIRECTORS’ REPORT In 2009, KASIKORNBANKGROUP (KGroup) expanded experience. Of notes are a smart queue management system our scope of business operations and enhanced our capabilities and account opening to conduct of transactions, without the in a number of ways. The number of KASIKORNBANK need to fill out forms. Additionally, suitable products will be (KBank) branches and ATMs was increased to 782 and offered for customer decision, with consistency in every sales 6,955, respectively, covering key locations nationwide for and service channel. greater customer convenience. In order to enhance our potential for larger fee-based income, especially through higher Today, KASIKORNBANKGROUP is a leading financial penetration in the life insurance business, we expanded our conglomerate of the country, offering a complete array of investments in Muangthai Group Holding Co., Ltd. Moreover, financial service solutions which are widely appreciated by we collaborated with China Minsheng Banking Corporation our shareholders, customers, the public, as well as diverse local to implement co-lending project to SMEs in China. Positive and overseas organizations. “Customer Centricity” continues to corporate image of our business advisory services were be highlighted as our key business strategy, with an aim of promoted among customers in a variety of industries. efficiently providing the utmost satisfaction to the seven For example, our presence on the Facebook and Twitter social customer segments.