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Management Discussion and Analysis

For the quarter and six-month period ended June 30, 2022

Environmental, Social and Governance Division

Email: irgroup@krungsri.com

Tel: +66 2 296-2977

Fax: +66 2 683-1341

Executive Summary:

The Thai economic conditions in 2Q/22 continued to improve from the prior quarter, underpinned by both domestic consumption and investment recoveries together with Thailand's strengthening external sector performance.

Corresponding to the aforementioned improvement in operating environment, on a normalized basis, Krungsri recorded a net profit of Baht 15,252 million for 1H/22, representing an increase of 18.6%, or Baht 2,390 million from 1H/21, driven mainly by lower expected credit losses, and higher net interest income.

Incorporating the extraordinary gain on investments from the sales of shares in Ngern Tid Lor Public Company Limited (TIDLOR) in 1H/21, net profit decreased 27.5%, or Baht 5,796 million.

Total loan outstanding stood at Baht 1,948,720 million, increasing by 3.1%, or Baht 58,344 million from December 2021. The loan growth was broad-based encompassing all customer segments supported by improvements in both business and household sentiments, underpinned by Thailand's economic recovery gaining further traction. The commercial lending continued to be the key growth engine with an increase in corporate loans of Baht 34,524 million, or 5.0%, and SME loans of Baht 15,108 million, or 5.2%, while retail segments increased by Baht 8,712 million, or 1.0%.

Deposits totaled Baht 1,819,012 million, an increase of Baht 39,873 million, or 2.2% from the end of December 2021, largely driven by growth in savings deposits.

On a normalized basis, non-interestincome decreased by Baht 616 million, or 3.6% , from 1H/ 21, mainly from a slowdown in the wealth management and securities- related fees and a decrease in gain on sale of written-off loans.

Incorporating the extraordinary gains on investment from the TIDLOR transaction recorded in 1H/21, non-interest income decreased by Baht 11,343 million, or 40.8%.

Asset quality remained strong with the non-performingloan (NPL) ratio registering 2.11% at the end of June 2022, compared to 2.20% at the end of December 2021.

With Krungsri' s prudential provision policy, total conservative loan loss reserves were accumulated to Baht 91,518 million as of June 30, 2022, resulting in an elevated coverage ratio of 189.2%, improving from 184.2% as of end of December 2021.

Capital adequacy ratio (Bank only) was recorded at 17.59%, compared to 18. 53% at the

end of December 2021.

Key developments in 2Q/22

Krungsri:

  • On June 30, 2022, Krungsri announced the planned acquisition of business with the intention to offer to purchase shares of Capital Nomura Securities Public Company Limited (CNS), totaling up 100% with a total consideration of up to approximately USD 155.3 million or approximately

KrungsriManagement Discussion and Analysis page 2/24

Baht 5,501 million. The transaction will involve two groups of selling shareholders of CNS as follows:

  1. The offer to purchase 99.1% of shares in CNS from Nomura Asia Investment (Singapore) Pte Ltd. (NAIS) (the First Purchase), which is subject to approval of the Bank's shareholders, the Bank of Thailand, and/or other related regulatory agencies, for a consideration of approximately USD 153.9 million or approximately Baht 5,450 million;
  1. The offer to purchase the remaining 0.9% shares in CNS after the First Purchase from minority shareholders of CNS, for a consideration of approximately USD 1.4 million or approximately Baht 51 million.

Regulatory Development:

  • On June 30, 2022, the Bank of Thailand announced the implementation of monetary policy normalization as the Thai economy continues to recover and banks have proved resilient with high levels of capital, loan loss provisions and liquidity. The key highlights of the announcement are as follows:
    1. Removal of banks' dividend payout ratio limit of no more than 50% of annual net profit
    2. Resumption of the Financial Institutions Development Fund (FIDF) fee at the normal level of 0.46% from 0.23%, starting 2023
    3. Extending the period of the minimum monthly payment rate on credit card at 5% to 2023, before increasing to 8% in 2024 and resuming the normal minimum monthly payment rate at 10% from 2025 onwards.

Thai economic outlook

Amidst the uncertainty and volatility of global economic and financial outlook, the Thai economy is expected to face downside risks in the second half of 2022, even though domestic economic activity and the tourism sector could benefit from the lifting of COVID-19 containment measures and international travel restrictions. With headline inflation remaining elevated, monetary normalization could result in gradual hikes of policy interest rate commencing in 3Q/22. Krungsri maintains our loan growth outlook at the upper end of the target range of 3 - 5% based on the economic growth forecast at 3.1% for the year.

Progress of Krungsri's measures to assist customers impacted by the coronavirus pandemic

Krungsri carried on with assisting customers impacted by the coronavirus pandemic in the various forms of assistance solutions ranging from long-term debt restructuring programs, the asset warehousing program, debt consolidation, and liquidity support.

As of June 30, 2022, the loans outstanding under Krungsri's customer relief programs accounted for approximately 8% of total loans outstanding, or Baht 159,517 million, representing 137,511 retail customer accounts and 5,314 commercial customers. For SMEs, additional credit lines of Baht 17,206 million were offered to 5,217 SME customers to support their liquidity requirement under the Bank of Thailand's soft loan and special rehabilitation loan programs and the Government Savings Bank' soft loan program.

KrungsriManagement Discussion and Analysis page 3/24

1. Statements of Profit or Loss and Other Comprehensive Income

2Q/22

1Q/22

Change QoQ

2Q/21

Change YoY

Consolidated

Baht mn

%

Baht mn

%

Interest Income

25,506

24,752

754

3.0

25,016

490

2.0

Interest Expenses

4,962

4,880

82

1.7

5,653

(691)

(12.2)

Interest Income, Net

20,544

19,872

672

3.4

19,363

1,181

6.1

Fees and Service Income

5,885

6,031

(146)

(2.4)

5,705

180

3.2

Fees and Service Expense

1,681

1,800

(119)

(6.6)

1,748

(67)

(3.8)

Fees and Service Income, Net

4,204

4,231

(27)

(0.6)

3,957

247

6.2

Non-interest and Non-fees Income

3,895

4,118

(223)

(5.4)

15,379

(11,484)

(74.7)

Other Operating Expenses

12,335

12,063

272

2.3

12,539

(204)

(1.6)

Pre-Provision Operating Profit (PPOP)

16,308

16,158

150

0.9

26,160

(9,852)

(37.7)

Expected Credit Loss

6,566

6,783

(217)

(3.2)

8,028

(1,462)

(18.2)

Income Tax Expense

1,861

1,913

(52)

(2.7)

3,511

(1,650)

(47.0)

Net Profit

7,881

7,462

419

5.6

14,621

(6,740)

(46.1)

Other Comprehensive Income, Net

(1,185)

(872)

(313)

(35.9)

744

(1,929)

(259.3)

Total Comprehensive Income

6,696

6,590

106

1.6

15,365

(8,669)

(56.4)

Net Profit Attributable To

Owners of the Bank

7,834

7,418

416

5.6

14,543

(6,709)

(46.1)

Non-Controlling Interest

47

44

3

6.8

78

(31)

(39.7)

Net Profit

7,881

7,462

419

5.6

14,621

(6,740)

(46.1)

Total Comprehensive Income Attributable To

Owners of the Bank

6,649

6,547

102

1.6

15,284

(8,635)

(56.5)

Non-Controlling Interest

47

43

4

9.3

81

(34)

(42.0)

Total Comprehensive Income

6,696

6,590

106

1.6

15,365

(8,669)

(56.4)

Earning Per Share (Baht)

1.06

1.01

0.05

5.0

1.98

(0.92)

(46.5)

KrungsriManagement Discussion and Analysis page 4/24

1H/22

1H/21

Change YoY

Consolidated

Baht mn

%

Interest Income

50,257

49,968

289

0.6

Interest Expenses

9,842

11,416

(1,574)

(13.8)

Interest Income, Net

40,415

38,552

1,863

4.8

Fees and Service Income

11,916

11,857

59

0.5

Fees and Service Expense

3,481

3,582

(101)

(2.8)

Fees and Service Income, Net

8,435

8,275

160

1.9

Non-interest and Non-fees Income

8,013

19,516

(11,503)

(58.9)

Other Operating Expenses

24,397

24,637

(240)

(1.0)

Pre-Provision Operating Profit (PPOP)

32,466

41,706

(9,240)

(22.2)

Expected Credit Loss

13,350

15,342

(1,992)

(13.0)

Income Tax Expense

3,773

5,159

(1,386)

(26.9)

Net Profit

15,343

21,205

(5,862)

(27.6)

Other Comprehensive Income, Net

(2,057)

1,365

(3,422)

(250.7)

Total Comprehensive Income

13,286

22,570

(9,284)

(41.1)

Net Profit Attributable To

Owners of the Bank

15,252

21,048

(5,796)

(27.5)

Non-Controlling Interest

91

158

(67)

(42.4)

Net Profit

15,343

21,205

(5,862)

(27.6)

Total Comprehensive Income Attributable To

Owners of the Bank

13,196

22,416

(9,220)

(41.1)

Non-Controlling Interest

90

154

(64)

(41.6)

Total Comprehensive Income

13,286

22,570

(9,284)

(41.1)

Earning Per Share (Baht)

2.07

2.86

(0.79)

(27.6)

For the second quarter ended June 30, 2022

On a quarter on quarter basis, the operating profit was Baht 16,308 million in 2Q/22, representing an increase of Baht 150 million, or 0.9%, from 1Q/22, driven by an increase in net interest income, corresponding to loan growth during the quarter, offset by a decrease in non- interest income together with an increase in operating expenses.

The net profit was recorded at Baht 7,834 million in 2Q/22, an increase of Baht 416 million, or 5.6% from 1Q/22, driven by higher operating profit and lower expected credit loss.

On a normalized year on year basis, the operating profit increased by Baht 380 million, or 2.4% from 2Q/21, largely attributed to higher net interest income. Meanwhile, the net profit increased by 23.2%, or Baht 1,477 million from 2Q/21, driven by higher net interest income and lowered expected credit loss.

KrungsriManagement Discussion and Analysis page 5/24

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Bank of Ayudhya pcl published this content on 20 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 July 2022 13:23:03 UTC.