Vision The Convenience Bank... trendy, easy to access, anywhere, anytime ...offering a complete line of products to all clients with speedy service all at one stop Mission Offering a complete line of financial services and products to all target groups with speedy and accurate services at competitive prices through nationwide branch network and adhering to good management principle. ANNUAL REPORT 2005 Krung Thai Bank Pcl. 1 Contents Page Financial Highlights 3 Message from the Chairman and the President 6 Board of Directors 10 Executive Officers 18 Business Environment 30 Nature of Business Operation 38 Organization Chart 50 Shareholding and Management Structure 52 Analysis of Operating Performance and Financial Standing 64 Risk Factors and Risk Management 78 Business Supervision 86 Report of the Audit Committee 99 Board of Directorsû Responsibility for Financial Reports 100 Auditorûs Report 101 Financial Statements 102 General Information 185 Executives Directory 195 Banking Network 200 Summary of Specified Items per Form 56-2 215 ANNUAL REPORT 2005 2 Krung Thai Bank Pcl. Financial Highlights Items Consolidated Krung Thai Bank 2005 2004 2003 2002 2001 2005 2004 2003 2002 2001 Financial Standing (million baht) Loans 891,997 935,204 978,372 849,774 700,406 894,731 937,804 979,026 849,776 700,413 Bad Debts and Doubtful Accounts 41,125 63,359 59,454 63,924 29,134 41,125 63,359 59,454 63,924 29,134 NPLs 97,635 119,693 79,443 107,844 64,655 97,635 119,693 79,443 107,844 64,655 Total Assets 1,160,021 1,148,903 1,134,501 1,058,443 976,741 1,160,070 1,149,417 1,134,451 1,058,388 976,468 Total Deposits 982,971 1,003,122 1,005,355 958,552 866,646 983,213 1,003,446 1,005,930 958,732 866,955 Total Liabilities 1,077,390 1,073,046 1,059,566 993,307 913,254 1,077,439 1,073,560 1,059,516 993,253 912,982 Total Shareholdersû Equity 82,631 75,857 74,936 65,136 63,487 82,630 75,856 74,935 65,135 63,487 Operating Performance (million baht) Interest and Dividend Income 50,061 45,929 40,778 39,802 39,485 50,166 46,024 40,778 39,801 39,485 Interest Expense 11,445 13,361 17,218 20,066 20,004 11,434 13,365 17,220 20,066 20,001 Net Interest and Dividend Income 38,616 32,568 23,560 19,736 19,481 38,732 32,659 23,558 19,735 19,484 Non - Interest Income 7,641 9,249 7,897 8,294 6,051 7,259 8,957 7,640 7,107 4,548 Non - Interest Expenses 22,517 22,347 19,131 17,990 20,146 22,282 22,173 18,951 16,819 18,681 Net Income (Loss) 13,024 11,094 8,705 8,009 (4,416) 13,024 11,094 8,705 8,009 (4,416) Financial Ratios (%) Return on Average Assets 1.13 0.97 0.79 0.79 -0.45 1.13 0.97 0.79 0.79 -0.45 Return on Average Equity 16.44 14.71 12.43 12.45 -6.84 16.44 14.71 12.43 12.45 -6.84 NPLs / Loans 10.32 12.35 7.96 11.46 8.19 10.32 12.35 7.96 11.46 8.19 BIS Total Capital Ratio 12.10 10.92 9.20 12.60 15.70 12.10 10.92 9.20 12.60 15.70 Net Income (Loss) / No.of Employees (million baht) 0.93 0.78 0.60 0.54 (0.29) 0.93 0.78 0.60 0.54 (0.29) Book Value per Share (baht) 7.33 6.80 6.70 5.80 5.70 7.33 6.80 6.70 5.80 5.70 ANNUAL REPORT 2005 Krung Thai Bank Pcl. 3 Clear Direction and Target Competition in business needs to be fast, versatile and timely. Krung Thai Bank has integrated all concepts of financial services plus the modern technology and wide network coverage to achieve the target of being a Convenience Bank... especially in processing activities fulfilling customer satisfaction in all demands. ANNUAL REPORT 2005 4 Krung Thai Bank Pcl. C o n v e n i e n c e B a n k ANNUAL REPORT 2005 Krung Thai Bank Pcl. 5 Mr. Suparut Kawatkul Chairman of the Board of Directors Message from the Chairman and the President Dear Valued Shareholders, The Bank has taken a clear direction of its business operation to achieve the vision of being çThe Convenience Banké, that is a convenience bank for all customer groups both as a çBank for Governmenté and a çBank for Businessé as well as a çBank for Banksé. The previous year 2005 was a year of self-preparation for laying strong foundation to boost the future business operation potential of the Bank by stressing the importance of customer needs. The Bank thus specified the form of its business and management structure to cater for corporate customers, medium business clients, retail customers including public sector clients. Regarding the increase of fee-based income, the Bank has set the application programs and arranged the format of product groups in preparation for providing services of funds transfer, payments and cash management as a more comprehensive çProcessing Banké. As for the operating performance in 2005, income continually increased with the net profit of Baht 13,024 million, up 17.4 percent from 2004, although the bank was obligated to pay corporate income tax of Baht 4,279 million after enjoying tax exemption in the prior year. ANNUAL REPORT 2005 6 Krung Thai Bank Pcl. Mr. Apisak Tantivorawong President In 2006, the Bank will continue to develop its service the interests of the shareholders and all concerned including providing to be the Convenience Bank for all client groups by social responsibility in order to achieve sustainable prosperity fully utilizing its strengths especially from the Bankûs being of the Bank. provider of financial services to the public sector through the Last but not least, the Bank wishes to extend its sincere Government Fiscal Management Information System (GFMIS) thanks and appreciation to the valued shareholders and and its large customer base nationwide. All these have customers - both in the public and the private sectors - for enabled the Bank to have full potential to provide complete the kind support given to the Bank, enabling its operation to line of financial services. The Bank will keep on developing be successful with stability, progress and prosperity all along. its information technology (IT) system and internal processes to move forward to excellence in service providing, enhancing the design and location of branches and service points to be more trendy and more convenient to customers, as well as assuring the Service Level Agreement for better service providing. On the occasion of the 40th anniversary of the Bank, setting the pace toward the 5th decade in 2006, this year has been proclaimed as the Year of Corporate Governance. The Board of Directors, the Management and all the Bankûs employees wish to express their intention and determination to jointly create the organization culture with good governance and business supervision based on righteousness, integrity (Mr. Suparut Kawatkul) (Mr. Apisak Tantivorawong) and professional code of ethics by taking into consideration Chairman of the Board of Directors President ANNUAL REPORT 2005 Krung Thai Bank Pcl. 7 Advantageous and Superior With continued technological development Krung Thai Bank has acquired efficient processing operation. With the setting up of Government Fiscal Management Information System, Krung Thai Bank has a good relationship with the public sector opening up opportunities and business volume, enabling the Bank to maintain a low cost per unit, an advantage superior to others. ANNUAL REPORT 2005 8 Krung Thai Bank Pcl. C o n v e n i e n c e B a n k ANNUAL REPORT 2005 Krung Thai Bank Pcl. 9 Board of Directors as at February 16, 2006 Mr. Suparut Kawatkul Chairman ANNUAL REPORT 2005 10 Krung Thai Bank Pcl. Mr. Suparut Kawatkul Chairman AGE 54 - Chairman, Government Pension Fund EDUCATION - Chairman, Student Loan Fund -M.Sc. (Economics), Queen Mary College, University - Deputy Chairman, Financial Institutions Development of London, U.K. Fund Committee -B.Sc. (Economics), London School of Economics - Executive Vice President, Thai Airways and Political Science, University of London, U.K. International Pcl. TRAINING - Commission member, Securities and Exchange - Advanced Management Program, Harvard Commission University, U.S.A. -Director, Thai Asset Management Corporation - Certificate in Double Taxation, University of Southern -Director, PTT Pcl. California, U.S.A. -Director, Board of Investment -Class 45/2005, Director Accreditation Program (DAP), -Director, Office of the Council of State Thai Institute of Directors Association (IOD) EXPERIENCE OTHER POSITIONS -Director-General, Revenue Department, -Permanent Secretary, Ministry of Finance Ministry of Finance - Chairman, Government Lottery Office ANNUAL REPORT 2005 Krung Thai Bank Pcl. 11 1. Dr. Chaiyawat Wibulswasdi 2. Mr. Apisak Tantivorawong Vice Chairman President Chairman of the Board of Executive Directors Executive Director AGE 59 AGE 52 EDUCATION EDUCATION - Ph.D. (Economics), Massachusetts Institute of -M.B.A.(Industrial Management), University Technology, U.S.A. of Tennessee, U.S.A. - B.A. (Economics), Williams College, U.S.A. - B.Eng. (Chemical Engineering), Chulalongkorn University TRAINING TRAINING -Class 11/2004, Director Accreditation Program (DAP), -Class 18/2002, Director Certification Program (DCP), Thai Institute of Directors Association (IOD) Thai Institute of Directors Association (IOD) OTHER POSITIONS OTHER POSITION - Advisor to the Deputy Prime Minister and Minister of -Director, Thai-German Ceramic Industry Pcl.