16 ASIA Care U The theme of this year’s annual report is ASIA Care U, the Bank’s major program to bring the highest quality service to our customers. The objective of the ASIA Care U program is to deliver Convenient, Amiable, Reliable and Express service to our customers regardless of how, where or when they interact with the Bank, as the introduction pages show. The ASIA Care U program was launched in early 2002 as the next step in Bank of Asia’s journey to fulfill our vision to become the best Thai financial service centre with a record of innovation, a reputation for professionalism and a practice founded upon the philosophy of doing right for our customers. Over the last five years the Bank has moved towards this vision by developing a comprehensive suite of products including deposits, loans, cards, mutual funds and Bancassurance with a strong sales and service network to deliver and support them. However the vision was not complete, as our branches, call centre and virtual channels were operating in isolation from each other and it was not easy for the Bank to put together a complete picture of all of a customer’s business with us. At the same time the competitors were also expanding their product range and re-engineering their branches to follow our lead. It was time for Bank of Asia to move ahead to the next level of service, and the ASIA Care U project was launched with a commitment to develop a truly customer centric bank. Our principal aim was to integrate the Bank’s customer service across all our delivery and service channels and all product lines, in order to provide a superior experience wherever the customer touched our network. In addition we aimed to develop seamless links between the sales and service points and the back office, ensuring a fast and accurate turnaround. For our customers this means that staff have all the information about customers’ accounts and transactions at their fingertips and can respond quickly and accurately to enquiries. At the same time the Bank will be able to reach out to our valued customers with new product and service offers which are appropriate to their needs. For our staff this creates a more efficient and dynamic working environment with the right tools to make serving customers simpler and more enjoyable. 17 For our shareholders the project helps to differentiate us from our competitors and to grow our share of profitable retail business. Technically this was an enormous undertaking requiring the installation of new computer systems, the integration of data that was held in many separate places and a great deal of staff training and preparation. As we knew from our experience of major change projects gained during the successful re-engineering of our branches and centralization of operations in 1996, a project of this size is not just about technology. It touches almost every department of the Bank from sales to operations, human resources to IT, risk management to marketing and keeping all our staff informed of the plans and progress of the ASIA Care U project was a top priority to ensure success. After a year of hard work and preparation, Bank of Asia launched phase I of the ASIA Care U project on 17th January 2003 with the opening of a new outbound telemarketing unit. This was followed by the launch of direct sales and in-bound call centre operations. The systems and procedures, supported by extensive training have had a significant impact on efficiency, staff morale and customer satisfaction. As one ASIA Phone agent commented “Working life is much easier since the implementation of ASIA Care U. Now it takes only a few seconds to identify the customers and call up their account details, and we can immediately response to their requirements. That’s much easier and it benefits both the customer and the Bank.” Similarly, one of the Bank’s customer commented that “Well, I can feel enormous changes in a positive way since Bank of Asia has introduced ASIA Care U, specifically in system and services provided. A great difference is that presently I can easily access ASIA Phone in a single touch and get the right answer in a single call also; no long delay, less waiting time for calling back and ASIA Phone staff is always there ready to help.” The Bank is now planning the next phase of development, making this integrated view and enhanced service level available in all our branches. Also in 2004 we plan to rollout our loan origination system, making applying for a loan even faster and easier. Beyond that, further phases of ASIA Care U will deploy datawarehousing and datamining tools to enhance the Bank’s understanding of customers and assist the development of products and services offerings that will better suit our customers. 18 Bank of Asia’s Strategy 2003 was the first year of implementation of Bank of Asia’s medium term strategy. The strategy seeks to ensure that the Bank generates the maximum return for its shareholders from the use of its resources by focusing on profitable customer segments and business lines. To develop the strategy, the Bank used an analytical framework known as Managing for Value (MfV) which is widely used by the Bank’s parent company ABN AMRO and many other global financial institutions for planning and investment analysis. Using MfV techniques the Bank analyzed the market and Bank of Asia’s own portfolio in three main business lines; consumer, small enterprise and medium sized enterprises to look for profitable growth opportunities. Historically Bank of Asia’s business was heavily concentrated in commercial lending, as was the case at most commercial banks; since government policy had long favoured large companies as the engine of economic growth for Thailand. The analysis showed that better long term returns would be obtained from a broader mix of business and consumer lending in the Bank’s portfolio. The Bank had already begun diversifying into consumer business since 1996 and was recognized as a leading consumer bank in the market. The plan called for even stronger focus on consumer lending as well as a new focus on the emerging growth in SME activity. The change in asset mix will be realized by setting different growth rates in each of the business lines. Overall, during the 4 year period the Bank aims to grow its performing loans by 75% while completely eliminating any NPLs remaining from the financial crisis. Achieving this target will give the Bank total lending assets of over Bt 150 billion. The capital increase in 2002 ensured that the Bank had sufficient capital to achieve this growth, without the need for further capital raising. To further boost the profitability of the Bank, more emphasis will be placed on fee generation. The Bank already enjoys strong fees from traditional products such as letters of credit and guarantees. These will be augmented by growth in newer lines of business such as cash management, bancassurance and e-commerce. 19 The Bank plans to achieve this growth by becoming much more customer focused. Within each business line, the Bank is identifying target customer segments and aligning staff, channels and products to meet the differing needs of each segment. Staff will specialize more, becoming more knowledgeable about the customer group they serve and better able to match them with appropriate products and services. Channels will also begin to specialize - business and personal customers may be served in different ways or in different locations and products will be specially developed to meet the needs of each customer group. Achieving these objectives will require significant investments in technology and staff development. This investment has already begun with the Bank’s ASIA Care U project described earlier in this report. Over the next 2 years the project will develop the infrastructure needed to bring the Bank’s service capabilities to the required level to reach the plan targets. Maximizing shareholder returns means that the Bank must concentrate more than ever on serving its clients and creating a challenging and rewarding environment for employees. This is what the strategy is designed to do - by bringing the Bank closer to its clients, encouraging faster decision-making and promoting individual responsibility for business performance. Clients will benefit from a renewed emphasis on them, employees will enjoy new and challenging opportunities and shareholders will reap the financial returns. 22 Management Discussion and Analysis Earnings Performance In 2003 Bank of Asia and its subsidiaries registered a net profit of Bt 1,818 million after reporting a loss of Bt 3,030 million in 2002. The turnaround reflected the Bank’s strengthened balance sheet, growth in performing loans, reduction of NPLs and adequate existing levels of provisioning. Following the final provisioning of five billion baht during first half of 2002 as a cushion for any adverse economic conditions, the Board of Directors do not expect any further significant provisions will be required in the foreseeable future. Earnings per share was Bt 0.36. Bank of Asia and its subsidiaries’ interest and dividend income in 2003 reached Bt 6,229 million, down by 6.6 per cent from 2002. However, interest expenses decreased sharply down 21.3 per cent from last year to Bt 2,383 million. These reductions were due to downward interest rate movement in the financial markets over the past year. Overall net interest and dividend income reached Bt 3,846 million, an increase of 5.6 per cent from 2002. Million baht Earnings performance 2003 2002 % change Interest and dividend income 6,229 6,668 (6.6) Interest expense (2,383) (3,026) (21.3) Net interest and dividend income 3,846 3,642 5.6 Net recovery (charge) from movements in bad debts and doubtful accounts & Loss on TDR 58 (4,456) Non interest income 2,603 2,468 5.5 Non interest expenses (4,666) (4,683) (0.4) Net profit / (loss) 1,818 (3,030) 23 Total non-interest income increased by 5.5 per cent from 2002 to Bt 2,603 million in 2003.