Banks Imperil Surge in World's Top-Performing Credit-Card Stock

(Bloomberg) -- Thailand’s banks are becoming a bigger risk to the world-beating surge in credit-card provider Krungthai Card Pcl’s shares.

Lenders are stepping up efforts to expand their card businesses, which may force the Bangkok-based firm to boost advertising and promotional outlays to retain customers, according to Chief Executive Officer Rathian Srimongkol.

Banks Imperil Surge in World's Top-Performing Credit-Card Stock

"We may have to sacrifice some earnings growth to protect our market share," Rathian, 58, said in an interview in his office Tuesday.

Krungthai Card’s total return of 160 percent in the past six months is the best globally for consumer-finance stocks with a minimum $1 billion market capitalization, data compiled by Bloomberg show. The rally outpaced the likes of Mastercard Inc. and Visa Inc.

Thai banks recently scrapped fees for a range of online banking transactions as disruption from financial technology ripples through the sector. Credit-card lending offers one way of shoring up earnings.

Banks Imperil Surge in World's Top-Performing Credit-Card Stock

"Major banks are turning to the credit-card market aggressively after losing fee income," Rathian said. "Their mindset now is to expand their customer base at all costs. But domestic consumption remains weak, so the only way to do that is to poach customers."

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Krungthai Card’s net income jumped 65 percent to 1.21 billion baht ($39 million) in January through March from a year earlier. Loan growth of 6 percent fell short of the full-year target of 10 percent partly because of stiffer competition, according to the company.

Rathian said in February that he expects a record profit in 2018 and declining bad loan provisions.

Large banks have deep pockets with which to woo customers, said Tanawat Ruenbanterng, an analyst at Maybank Kim Eng Securities (Thailand) Pcl. Krungthai Card may have to increase provisions for bad loans if it responds to fierce competition by loosening lending practices, Tanawat said.

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