Delivering Simplicity ANNUAL REPORT 2012 CONTENTS
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Delivering Simplicity ANNUAL REPORT 2012 CONTENTS 2 Message from the Chairman & the President and Chief Executive Officer 4 Our Organization 8 Financial Highlights 10 Delivering Simplicity: 2012 at a Glance 13 Awards and Recognition 14 Our Strategy and Business Model • Our Promise • Our Driving Force 20 Operating Environment 26 Competitive Capability • Delivering Simplicity to the Customers We Serve • Our Subsidiaries, Associated and Related Companies 74 Managing Risk 86 Corporate Governance • Corporate Governance Policy • Policy and Measures against Insider Information • Internal Control and Internal Audit System 144 Corporate Social Responsibility 150 Financial Reporting and Financial Statements • Management Discussion and Analysis • Report of the Board of Directors’ Responsibility for Financial Reporting • Report of the Audit Committee • Report of the Nomination and Remuneration Committee • Report of the Independent Certified Public Accountants • Financial Statements • Notes to the Consolidated and Separate Financial Statements 259 General Information 264 Group of Companies 267 Distribution Network 281 Summary of Specified Items per Form 56-2 MESSAGE FROM THE CHAIRMAN & THE PRESIDENT AND CHIEF EXECUTIVE OFFICER The year 2012 was a banner year for Bank of Ayudhya Pcl. (Krungsri), marked by impressive growth and profitability, with resounding achievements and crucial operational milestones that helped us deliver on our promise to ‘Make Life Simple’ for our customers. It was a year that tested our resolve with global financial market volatility, but also one that allowed us to demonstrate how our focus on customer centricity can help us manage through both external shocks and increasing competition to deliver greater value to our stakeholders. The year began as a story of recovery and growth, following the devastating floods that wreaked havoc on the lives of millions of Thai people – and the economy – in late 2011. Flood-related repairs and consumption drove the economy throughout the first quarter. Subsequently, domestic demand-driven growth, from both domestic investment and increased consumption, kicked in to drive the economy further along the road to recovery. Krungsri benefited from a number of government policies aimed at stimulating growth in the retail segment, including a minimum wage hike as well as tax incentives for first-car and first-home buyers. Thanks to the strength of both our consumer franchise and capital position, the acquisition of HSBC Thailand’s retail banking business was successfully completed in the first quarter of the year. With the combination of strong organic growth and the HSBC acquisition, our growth exceeded the industry average for the year and we attained new records in terms of asset size, net profits and return on equity. With a robust performing loan growth of 17.2%, Krungsri posted THB 14.67 billion in net profits, up 58% from last year – a new milestone in our financial performance that also made Krungsri one of the top performing banks in terms of net profit growth. Meanwhile, non-performing loans were reduced from 3.7% 2 3 to 2.4% of total loans, the Bank’s coverage increased sharply to 146%, and our net interest margin (NIM) was maintained at a healthy 4.33%. The outlook for the economic and financial sectors reveals a picture of continued strong retail growth, 2012 also saw the brand’s promise to ‘Make Life Simple’ become a reality, as the Bank began to deliver with structural changes, increasing urbanization and government policies all playing a role. For Krungsri’s on this promise in deep, meaningful and innovative ways that are having a positive impact on the lives part, we will continue on our journey to deliver simplicity to all of our stakeholders, investing in new of our customers across the banking spectrum. New innovations this year included products such as the information technologies and fostering the development of our corporate culture – what we like to call ‘Mee Tae Dai’ savings scheme and the ‘Instantly Insured’ insurance offering, along with new branch format the Krungsri Way. E-business and development will be a key enabler on the next phase of our journey. rollouts, mobile payment solutions and ‘Simple Q’ to streamline service at branches and deliver simplicity We also mark the commencement of our ‘regional strategy’ which we will communicate more fully in the to our customers. months ahead. During the latter part of 2012, the financial markets were surprised by the unexpected news concerning As we look to the future, the Bank is well positioned to enter 2013 under the sound leadership of our new GE Capital’s partial sale of its shares in our bank. However, when the execution of the 7.60% share incoming CEO and President who, while stepping into new roles, are both familiar faces in the Krungsri sale and disclosure of GE Capital’s intention to explore strategic options for the remaining 25.33% senior management team. They bring a history of commitment and dedication to the Bank. We are were announced, the Board, the management and staff took the development calmly, recognizing that confident that they will continue to build on the momentum we have created in 2012 to achieve new there would be no adverse effect on the Bank’s financial posture. Furthermore, in the current business heights in 2013. environment, successful management of large, fully capitalized financial institutions lies in the vision and operating competence of the Board and management / staff, respectively. The operating concept of Lastly, the Board wishes to take this opportunity to express our sincere thanks to the entire Krungsri team “one for all and all for one” that was instilled in the Bank during the last several years contributed to drive for the way they have stood behind our new brand promise and brought it vividly to life, and to all of our excellent results. In this context the Bank will be resilient in the face of a change in a major shareholder. stakeholders and customers for their continued support. Most of all, our achievements in 2012 demonstrate that we listen to our customers and act to deliver simple solutions tailored to meet or exceed their needs. We continue to be first to market in terms of adopting cutting-edge technology to serve customers – a commitment that will continue in 2013. The innovative products and services we have introduced also benefit Krungsri as a group through lower costs, enhanced cross-sell capabilities, economies of scale and greater efficiencies through intelligent use of technology and data. Veraphan Teepsuwan Mark Arnold Chairman President and Chief Executive Officer Krungsri Annual Report 2012 OUR ORGANIZATION BOARD OF DIRECTORS ORGANIZATION STRUCTURE Board of Directors 1 2 3 4 Nomination and Audit Remuneration Committee Committee Compliance Review Risk Management Committee Committee 5 6 7 8 4 5 Executive Committee President and Credit Committee Chief Executive Officer Audit Group 9 10 11 12 Business Units Support Units 1 Mr. Veraphan Teepsuwan 5 Mr. Pornsanong Tuchinda 9 Mr. Virojn Srethapramotaya Chairman Director Director • Corporate Banking Group • Marketing and Cross Sell Group Risk Management SME Banking Group Operations Group 2 Mr. Mark Arnold 10 Miss Potjanee Thanavaranit • • Director Committee Member Independent Director • Transaction Banking Business Group • Information Technology Group • E-Business Group • Finance Group President and Chief Executive Officer 6 Mrs. Janice Van Ekeren Chairman of the Audit Committee Director • Consumer Banking Group • Risk Management Group Chairman of the Risk Management 11 Mr. Phong-adul Kristnaraj • Distribution Group • Business Transformation Group Committee Risk Management Independent Director Committee Member • Treasury Group • Transformation Group 3 Mr. Karun Kittisataporn Audit Committee Member • Corporate Communications and Independent Director Compliance Review Committee Member Public Relations Group 12 Miss Nopporn Tirawattanagool Chairman of the Nomination and Director • Human Resources Group Remuneration Committee 7 Mr. Pongpinit Tejagupta • Legal and Compliance Group* Director Nomination and 4 Mr. Virat Phairatphiboon Remuneration Committee Member Independent Director 8 Mr. Xavier Pascal Durand Director Audit Committee Member Nomination and Remuneration Chairman of the Compliance * Compliance-related matters are reported directly to the Board of Directors Committee Member Review Committee Krungsri Annual Report 2012 SENIOR MANAGEMENT 1 2 3 4 5 6 11 12 13 14 6 7 7 8 9 10 15 16 17 1 Mr. Mark Arnold 6 Mr. Phonganant Thanattrai 11 Miss Anuttara Panpothong 15 Miss Puntipa Hannoraseth President and Head of Distribution Head of Human Resources Head of Audit Chief Executive Officer 7 Mr. Sudargo Harsono 12 Mr. Thakorn Piyapan 16 Mr. Pipat Assamongkol 2 Mrs. Janice Van Ekeren Head of Marketing and Cross Sell Executive Vice President, Head of Transaction Banking Business Chief Financial Officer Office of the President & CEO 8 Mrs. Wanna Thamsirisup 17 Mr. Kris Chantanotoke 3 Mr. Pornsanong Tuchinda Head of Operations 13 Mr. Chandrashekar Executive Vice President of Wealth Head of Corporate Banking Subramanian Management Division 9 Mr. Rohit Khanna Krishoolndmangalam 4 Mr. Philip Tan Chen Chong Head of Business Transformation Chief Risk Officer Head of E-Business 10 Mr. Sayam Prasitsirigul 14 Mrs. Voranuch Dejakaisaya 5 Miss Phawana Niemloy Head of SME Banking Head of Information Technology General Counsel Krungsri Annual Report 2012 FINANCIAL HIGHLIGHTS Consolidated Financial Statements (Consolidated)