AnnualAnnual Report Report 2019 2019 BankçèāÓāòČú of SustainabilityŚÖÓöāðñĀēÖñĆè Bank of Sustainability KBank conducts business with the foundation of Bank of Sustainability, with appropriate risk management and good corporate governance principles. We strive to balance economic, social, and environmental dimensions to achieve goals and create sustainable long-term returns. The philosophy of sustainable development is instilled in all our operations as part of our Green DNA, ensuring maximum benefit for all stakeholders and paving the way for sustainable growth. Multi- Large Corporate Corporate Business Business Medium Mass Business Small and Middle Micro Income Business High Affluent Net Worth Individual Vision KASIKORNBANK aims to be the most innovative, proactive, and customer centric financial institution, delivering world class financial services and sustainable value for all stakeholders by harmoniously combining technology and talent. Core Values Customer at Heart Agility Collaboration Innovativeness Annual Report 2019 KASIKORNBANK Financial Highlights (Consolidated Financial Statements) 004 Financial Highlights (Consolidated Financial Statements) As of or for the years ended December 31, 2019 2018 2017 2016 2015 COMMON SHARE INFORMATION Per share (Baht) • basic earnings 16.18 16.07 14.35 16.79 16.49 • book value 169.79 157.23 145.67 134.44 119.42 • dividends 5.00 4.00 4.00 4.00 4.00 Share price (Baht) (1) • high 202.00 242.00 235.00 201.00 235.00 • low 131.00 182.50 182.00 144.00 147.00 • closing 151.00 185.00 232.00 177.50 150.50 Common shares outstanding • average basic (Million shares) 2,393.26 2,393.26 2,393.26 2,393.26 2,393.26 • end of year (Million shares) 2,393.26 2,393.26 2,393.26 2,393.26 2,393.26 Market capitalization (Million Baht) 361,382 442,753 555,236 424,804 360,186 VALUE MEASURES Price to earnings ratio (PER) 9.33 11.51 16.17 10.57 9.13 Price to book value ratio (PBV) 0.89 1.18 1.59 1.32 1.26 Dividend yield (based on closing share price) 3.31% 2.16% 1.72% 2.25% 2.66% Dividend payout ratio (2) 34.43%(7) 29.40% 32.80% 26.96% 27.83% Number of employees (2) 20,443 20,681 20,839 21,029 21,484 Number of domestic branches (2) 886 958 1,026 1,107 1,120 OPERATING RESULTS (Million Baht) Interest income - net 102,688 98,538 94,161 89,678 85,012 Non-interest income 57,803 56,945 62,695 63,725 62,503 Fees and service income - net 36,740 38,117 41,306 38,943 37,526 Net premiums earned - net (164) 3,537 5,935 10,264 12,341 Other income 21,227 15,291 15,454 14,518 12,636 Total operating income - net 160,491 155,483 156,856 153,403 147,515 Total other operating expenses 72,729 68,348 66,372 63,854 66,656 Operating profit before provision expense (3) and income tax expense 87,762 87,135 90,484 89,549 80,859 Impairment loss on loans and debt securities 34,012 32,532 41,810 33,753 26,377 Net profit (4) 38,727 38,459 34,338 40,174 39,474 FINANCIAL POSITION STATEMENT INFORMATION (Million Baht) Loans (5) 2,001,956 1,914,072 1,802,783 1,697,581 1,609,887 Allowance for doubtful accounts and revaluation allowance for debt restructuring 124,879 119,485 103,435 85,212 64,317 Non-performing loans, gross (NPL gross) 84,038 74,400 69,674 65,087 49,490 Non-performing loans, net (NPL net) (6) 55,682 41,431 38,570 33,553 24,586 Total assets 3,293,889 3,155,091 2,900,841 2,843,278 2,555,305 Deposits 2,072,049 1,995,001 1,878,672 1,794,835 1,705,379 Total liabilities 2,840,174 2,737,269 2,513,019 2,489,367 2,243,092 Total equity (4) 406,358 376,298 348,625 321,746 285,800 Risk weighted assets - KASIKORNBANK FINANCIAL CONGLOMERATE 2,210,881 2,081,697 1,949,783 1,824,372 1,732,067 Note: • Financial statements as at December 31, 2016 has been changed the presentation in the statement of financial position to comply with the Bank of Thailand (BOT) notification number SOR NOR SOR 21/2558, directive dated December 4, 2015, regarding the “Preparation and announcement of the financial statements of commercial banks and holding companies which are parent company of group of companies offering financial services”. However, this change has not materially effect on total assets, total liabilities and total equity of the Bank and its subsidiaries. (1) Local board / High - low share prices during the year (5) Loans = Loans to customers less deferred revenue (2) Bank only (6) Non-performing loans, net = Non-performing loan less allowances for doubtful accounts (3) Provision expense = Impairment loss on loans and debt securities (7) Calculated from common shares outstanding at end of year less treasury shares in February 2020 (4) Excluding non-controlling interests Annual Report 2019 KASIKORNBANK Financial Highlights (Consolidated Financial Statements) 005 Net Profit NPL Gross to Total Loans (Unit: Million Baht) (Unit: Trillion Baht) 3.65% 3.32% 3.30% 3.34% 2.70% NPL Gross to Total Loans 39,474 40,174 34,338 38,459 38,727 1.61 1.701.80 1.91 2.00 Loans 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Total Assets Total Liabilities (Unit: Trillion Baht) (Unit: Trillion Baht) 3.29 2.74 2.84 3.16 2.51 2.84 2.90 2.49 2.56 2.24 Total Assets Total Liabilities 1.61 1.701.80 1.91 2.00 1.71 1.791.88 2.00 2.07 Loans Deposits 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 As of or for the years ended December 31, 2019 2018 2017 2016 2015 PERFORMANCE INDICATORS Return on average assets (ROA) 1.20% 1.27% 1.20% 1.49% 1.60% Return on average equity (ROE) 9.90% 10.61% 10.24% 13.23% 14.54% Net interest margin (NIM) 3.31% 3.39% 3.44% 3.52% 3.67% Cost to income ratio 45.32% 43.96% 42.31% 41.63% 45.19% ASSET QUALITY RATIOS / FINANCIAL POLICY RATIOS Loans to deposits ratio 96.62% 95.94% 95.96% 94.58% 94.40% NPL net to total loans (8) 2.45% 1.89% 1.85% 1.74% 1.36% NPL gross to total loans (9) 3.65% 3.34% 3.30% 3.32% 2.70% Total allowance to loans (10) 6.24% 6.24% 5.74% 5.02% 4.00% Total allowance to NPL gross (Coverage ratio) (10) 148.60% 160.60% 148.45% 130.92% 129.96% Provision expense to average loans (Credit cost) (11) 1.74% 1.75% 2.39% 2.04% 1.68% Capital adequacy ratio - KASIKORNBANK FINANCIAL CONGLOMERATE 19.62% 18.32% 17.96% 18.84% 18.00% Tier 1 capital ratio - KASIKORNBANK FINANCIAL CONGLOMERATE 16.19% 15.90% 15.66% 15.16% 14.53% Note: • Financial statements as at December 31, 2016 has been changed the presentation in the statement of financial position to comply with the Bank of Thailand (BOT) notification number SOR NOR SOR 21/2558, directive dated December 4, 2015, regarding the “Preparation and announcement of the financial statements of commercial banks and holding companies which are parent company of group of companies offering financial services”. However, this change has not materially effect on total assets, total liabilities and total equity of the Bank and its subsidiaries. (8) Loans used in calculation are loans to customers and loans to financial institutions less allowance (10) Allowance = Allowance for doubtful accounts and revaluation allowance for debt for doubtful account of non-performing loan. restructuring 9) Loans used in calculation are loans to customers and loans to financial institutions. (11) Provision expense = Impairment loss on loans and debt securities Over the past 70 years, we have developed into Thailand's leading and strong financial conglomerate in Thailand, based on sustainable development in the economy, society and environment. Sustainable development is our organizational culture and the foundation of all we do because sustainable development ensures the maximum benefit for all stakeholders and paves the way for the sustainable growth of Thailand. Bloomberg Carbon Disclosure Project Dow Jones Sustainability Sustainability Award, FTSE4 Good MSCI ESG Ratings at “AA” Gender-Equality Index (CDP) Indices (DJSI) $TQP\Gb%NCUUQH Emerging Index A leading company (GEI) The first and only bank The first and only bank the banking industry Selected as a member of in the banking industry The first and only company assigned A- (Leadership Level) in Thailand and ASEAN for three consecutive years the FTSE4Good Emerging Index in emerging markets in Thailand selected as (2019) selected as a member of the DJSI (2018 - 2020) for four consecutive years in ESG operations a member of the Bloomberg for four consecutive years (2016 - 2019) (2019) Gender-Equality Index (2016 - 2019) for two consecutive years (2019 - 2020) Carbon Neutral Certification The ESG 100 Certificate SET Sustainability Awards Sustainability Distinguished Awards Thailand Sustainability The first commercial bank One of 100 companies Outstanding Sustainability Awards Disclosure Award Sustainable Development Investment (THSI) in Thailand granted selected as having outstanding for two consecutive years (2019) Excellence Included in THSI for four years this certification ESG performance (2018 - 2019) (2019) (2015, 2017 - 2019) for two consecutive years for four consecutive years (2018 - 2019) (2016 - 2019) Contents 008 Statement of Management Report Financial Reports the Board of Directors 010 066 011 Management Discussion 067 Report of the Board of Directors’ and Analysis Responsibilities for Financial 012 Overview of Operating Environment Reports 017 Risk Management and Risk Factors 068 Report of the Audit Committee 027 Business Directions and Operations 070 Independent Auditor’s Report of Core Businesses 076 Financial Statements and Notes 042 Operating Performance and to the Financial Statements Financial Position Analysis 060 Operations of Support Groups 064 KASIKORNBANK’s Investments in Subsidiaries, Associated Companies and Joint Venture 065 Shareholder Risk Management