I read many an investor presentation from banks around the world on more or less a weekly basis, and occasionally one stands out from the crowd.
Such is the case with the January 2019 effort from Kasikornbank. Thailand’s fourth-largest bank by assets – by loans and deposits it also ranks fourth – has set some eye-catching targets.
Take its K-Plus mobile banking offering. Already K-Plus has 10 million customers; that in itself is an already impressive number, given that Kasikornbank has around 14 million customers in total. And it represents impressive annual growth: the bank ended 2017 with 7.3 million users, up from 4.6 million the previous year, but it is a drop in the ocean compared to the target it has set. The bank believes it can grow K-Plus numbers to up to 100 million by expanding it to the regional market via partnerships. It is also continuing to target low-income earners who are not currently Kasikornbank customers.
Organic growth targets for retail loans are in the range of 9-12% for 2019, and it is using machine lending and artificial intelligence technology to initiate financial and life solutions related to customers’ lifestyles and needs.
K Bank grabs ride-hailing deal
And then there is the investment in Grab: in November last year, K Bank invested $50m in the ride-hailing firm, with an aim to help launch the GrabPay electronic wallet in its sixth South-East Asian market in 2019.
The deal also enables K Bank to use Grab’s data on merchants and drivers. The goal is to craft loan products while minimising non-performing loans with optimised use of data. So the Grab app will be integrated with the K Plus app and the bank will offer loans via the apps.
Other 2018 highlights included a local chart-topping success in the Apple App store. K Plus is Thailand’s most popular app on Apple’s iOS platform outside the gaming segment, ahead of local rival banks Siam Commercial, Krung Thai Bank and Bangkok Bank.
But it is the use of data and its potential for monetisation that really is attention-grabbing. K Bank really is aiming high in terms of becoming what it terms a ‘data-driven bank’, and believes that project data-driven data will account for one-half of its income by 2020.
Such ambitions do not come cheap. K Bank’s IT group has set an investment budget for tech development this year of around $160m. It is, admittedly, a modest sum by Chase or Citi standards, but in the context of the Thai market, it is a significant investment. And if K-Plus can grow user numbers to anything approaching 100 million, and get close to its data revenue targets, K Bank will certainly put itself on the map.
Mastercard trumps Visa for Earthport
As EPI goes to print comes news that Mastercard looks to head off rival Visa as it attempts to buy Earthport for £233m ($306m).
Over the Christmas period, Visa made an unexpected £198m bid for the company. The offer was recommended by the Earthport’s board and put to shareholders; however, in a statement to the market on 25 January, Earthport’s board withdrew its recommendation for Visa’s offer and urged shareholders to instead take Mastercard’s deal, which is at a 10% premium to Visa’s. Earthport’s shares, which have risen four-fold since Visa first offered to buy the company, rose another 30% to £0.36.
Earthport has been around the block a few times since it was founded in 1997. It floated on AIM in 2009, and its adjusted operating loss for 2018 rose by 33% to £8.4m (FY2017: £6.3m). Its share price stumbled around single-digit territory for much of 2018, reaching a low of £0.055 in December, having peaked at £0.48 in April 2015.
Earthport provides cross-border payment services in the UK, Europe, North America and internationally, operating through two segments: transactional and professional services. It does this through a combination of a network of segregated bank accounts in various geographies, software that mirrors movements of funds from bank to bank, and a knowledge base embedded in the platform and organisation related to each country.
A deal for either Mastercard or Visa makes sense from the perspective of growing revenue from international money transfers. In other words, Earthport offers a revenue stream not dependent on traditional plastic cards. At the figures being canvassed the purchase price does seem steep, but is quite a coup for the new management team that took over at Earthport last year.