When your Italian limo driver takes you to the wrong airport and you miss your flight, there’s only one thing to do: buckle up and put your lives in the hands of an aspiring Michael Schumacher. And it’s all in a day’s work for members of the senior management team at Thailand’s Kasikornbank as they circle the globe meeting analysts and investors.
Kbank, Thailand’s third-largest bank by assets after Bangkok Bank and state-run Krung Thai Bank, was started in 1945 by a Thai-Chinese family named Lamsam – a word that in Thai means ‘rich’. While the Lamsam family’s stake is now less than 5 percent, CEO Banthoon Lamsam is an able spokesman with IR high on his list of priorities.
The Asian currency crisis of 1997 and the collapse of the Thai baht were watershed events for Kbank. Indeed, these events spurred restructuring at most Asian companies, but the banks were hit especially hard.
Kbank’s first international roadshow was in 1996 when it issued its inaugural Yankee bond with an investment-grade rating of A3 and an expectation that the rating would rise. ‘The only difficulty was that international banking standards were different from Thailand’s – for instance, in Thai banking we had no definition for non-performing loans (NPLs),’ recalls Boontuck Wungcharoen, executive vice president and head of Kbank’s corporate business group. ‘After the crisis everything evolved toward international standards, which makes our story easier to explain to international investors.’
Kbank put its new look to the test in 1998 as the first Thai bank to raise capital post-crisis. It passed with flying colors, yielding some $900 mn in new equity capital. ‘It was a big challenge,’ Boontuck says. ‘Everyone was still skeptical because of the crisis. But Tarrin Nimmanahaeminda, our finance minister at the time, had done a roadshow ahead of us, and that helped gain the confidence of international investors. Still, it was a difficult trip, visiting three continents with five to eight meetings a day for 20 days.’
Kbank’s senior management credits Banthoon with the company’s success in the capital markets. ‘Even before the crisis he was regarded as a straight-talker,’ Boontuck notes. ‘He had been telling the real story and he earned the confidence of the investment community. That trust later helped us raise capital.’
Before the currency crisis Kbank’s IR was handled by various senior managers and overseen by the financial planning department. The IR and shareholder services division (under the executive office of the corporate secretariat group) was established in May 1998. At the end of 2001 IR was moved under the umbrella of a new department – corporate communications – and this new department was restructured again in September 2003 to incorporate the IR division.
Adit Laixuthai has a dotted reporting line straight to the CEO as senior vice president and chief of investor relations. He also co-heads the whole 42-strong group of corporate communications officers, including his team of six IROs and 20 executive secretary and shareholder registration officers. Recently he was appointed to head the department of overseas office management and correspondent relations. Meanwhile, the other co-head of corporate communications, senior vice president Daranee Tanchaiswasd, oversees PR and recently took over internal communications.
No more runaround
Adit admits that when shareholders previously approached Kbank for information, they would get ‘the runaround’. But now analysts and investors acknowledge Kbank, or Thai Farmers Bank as it was known until spring 2003, as Thailand’s IR leader. It won the award for best IR by a Thai company at the IR Magazine Asia Awards last year and has been in the top three contenders for the award three years in a row. Last June Institutional Investor magazine voted it ‘best company IR in Thailand: buy-side view’. And for the third consecutive year Asiamoney magazine gave it the award for the best IR in Thailand.
Kbank takes seriously its responsibility as a pioneer of Thai IR, and Adit is proud to report that his country has a growing IR community. Kbank was one of the founders of the Thai IR Club (TIRC) along with CPF, AIS, Siam Cement, the Electricity Generating Co, Shin Corp and Sansiri. The club is supported by the Stock Exchange of Thailand (SET).
Adit dates Kbank’s major IR push to 2000 when the firm launched its new web site with financial results, annual reports and presentations. The site also features information not formally required under Thai Gaap, like data on restructured loans, and there’s an e-mail link to the IR division and an FAQ section. That same year Kbank started its IR quarterly review, which Adit describes as a ‘soft analysis’ of the past quarter’s developments.
In 2001 IR was given another boost with Kbank’s ‘balanced scorecard’. This top-down strategy covers department, division and personal goals. ‘Performance-related opportunity’ (Pro) evaluates individual performance against personal goals. Adit likes his IROs’ goals to converge. ‘We look at unified focus as fundamental to building relationships with other people,’ he explains.
Kbank closely observes international peers – such as CIBC and JP Morgan Chase – as it revamps its disclosure practices. No wonder, then, that it was one of the first Thai companies to introduce management’s discussion and analysis (MD&A) in its annual report, though it has to stay within limits set by the Thai authorities. For example, Thailand requires quarterly financial statements, but precludes companies from making forecasts. Still, Adit and his team help analysts with macroeconomic factors and occasionally comment on their research prior to publication, making sure it’s in line with publicly available information.
Twice a year Kbank sets out on non-deal roadshows. During the first half Adit accompanies Banthoon to meet with investors and analysts in Thailand and worldwide. Then, toward the end of the year, Adit takes the three executive vice presidents heading up the corporate business, credit management and retail business groups to meet major foreign institutional shareholders in Asia.
One-on-one meetings are preferred, though the schedule often includes lunch for ten to 15 analysts, fund managers and institutional salespeople. Merrill Lynch and CSFB, which publish extensively on Kbank, usually help with the logistics of overseas roadshows and send institutional salespeople along to introduce clients. The rest of the time, Adit maintains a ‘never say no’ policy for meeting with investors, both current and potential. Around 300 people make the trip to Kbank’s Bangkok headquarters each year.
With such a strong in-house team and support from brokerages, Kbank dispenses with outside IR consultants. All broker briefings and investor-meeting records – right down to photos of fund managers and analysts – go into a detailed internal database. ‘We remember what they have told us in the past – that’s how we form relationships with them,’ Adit says.
Buying opportunity
During the 1997 crisis, foreign investors began viewing Thailand – and the weak baht – as a buying opportunity. From 25 percent foreign ownership before the crisis, Kbank’s overseas following has risen to 49 percent of shares outstanding – the limit set by the government. And that’s without a US listing; Kbank is listed solely on the SET.
The Thai banking sector had a stellar year in 2003, with Kbank more than doubling its net profit to Bt14.81 bn ($380 mn). From nearly Bt240 bn (or 42 percent of total loans) in NPLs – loans that have had no repayments in at least three months – in Q2 1999, Kbank was down to Bt98 bn (or 17 percent of total loans) in NPLs by Q4 2003. ‘That has a great impact on the bottom line of the bank,’ says Richard Clarke, executive vice president and head of Kbank’s credit management group.
Low interest rates and a rosy future have been fueling house and car buying in Thailand, not to mention equity investing. The Thai economy grew 6.4 percent last year and the government expects 8 percent growth in 2004 – topping its South East Asian neighbors – and 10 percent in 2005.
Under these conditions, Adit explains, investors look for good quality companies – blue chips like Kbank, whose outlook remains positive. In October 2003, as part of managing asset liability, Kbank issued Bt12 bn in subordinated debt to lock its funds at a favorable, long-term rate. And in January 2004 the bank exercised its call option by redeeming Bt40 bn in expensive hybrid capital, sooner than planned.
The bank is not resting on its laurels, though, with Adit firm in his resolve to measure and improve the firm’s IR performance. For example, twice a year shareholders and analysts reply anonymously to a perception study questionnaire.
‘We look at the whole package, measuring shareholder satisfaction based on the speed, validity and reliability of the information we disclose, the accuracy of our forecasts and the usefulness of our web site,’ Adit says. Above all, he emphasizes the participation of Kbank’s top executives in IR – particularly Banthoon. ‘Our executive management team has fully supported and participated in Kbank’s IR program,’ he continues. ‘Unfortunately, not all Thai companies enjoy this type of situation. Some of them struggle because their CEOs think of their IR departments as mere information booths. Hopefully those executives will begin looking at IR in a more constructive way and lend more support to their IR crews.’
What the analysts say
James Moss, HSBC Securities
‘Kbank has led the way in IR since the 1997 currency crisis. Siam Commercial, which is also very good, came late to the party and modeled its IR on Kbank’s. In terms of professionalism and the availability of people, Kbank makes a big effort to give as much information as possible.
‘We’re especially interested in Kbank’s retail banking operation and I get plenty of access to David Hendrix, the head of retail banking.’
Derek Bloomfield, JP Morgan
‘Kbank’s investor relations team is both responsive and professional. In fact, I just talked to the company this morning and it was able to help me out with some numbers.
‘The big impetus for improvement in IR at Kbank and other Thai banks was the currency crisis, which forced the companies to go out and raise capital in the international capital markets. International investors demanded a certain level of transparency and disclosure, and that forced Kbank to ramp up its commitment.
‘There has also been an improvement in corporate governance compared with pre-crisis. It’s not something we constantly make a point of in our research, but it is noted.
‘I use Kbank’s web site a lot, especially for supplemental quarterly information which some other banks include in their financial statements. I also check the web site to clarify the composition of Kbank’s loan book.
‘I get good access to senior management and I have brought clients to meet with Banthoon on multiple occasions. Hendrix has also been very receptive to meeting our clients, who are usually up to speed on Thai banking so we can cut to the chase and discuss the issues of the day – loan growth and operational trends. On the other hand, if we have clients who are new to the sector, Kbank’s IR team is capable of walking them through the basics. It can give value-added insight into the whole sector.’
Poramet Tongbua, Tisco
‘Kbank’s IR team is more proactive in disclosing information than other Thai banks. Indeed, many banks have improved significantly since the 1997 crisis, and investors now get more information than before.
‘I often arrange meetings between our clients and Kbank’s IR team, though meetings with senior management have often been turned down. It’s not very common for senior management at Thai banks to see investors; maybe the IROs are afraid management would give out more information than it should.
‘Still, Kbank has been especially good at standardizing the information it discloses, so all analysts get the same information at the same time. I get a lot of information from its web site, especially its roadshow presentations and results. The site is useful and easy to access.’
