Bank of Ayudhya (BAY) aims to expand its consumer finance business into the potentially new growth centre of the Greater Mekong subregion covering Cambodia, Laos, Myanmar and Vietnam under a three-year plan.
Under the plan, which runs from this year to 2017, the bank is set to offer a broad array of retail loan products including vehicles, electrical goods and personal loans, as well as microfinance, said first executive vice-president Thakorn Piyapan.
Entering the regional market will enable BAY, commonly known as Krungsri, to capitalise on greater business opportunities from the single market under the Asean Economic Community (AEC), due to take shape at the end of 2015.
In Laos, BAY is expanding business through Krungsri Leasing Services Ltd, a joint venture with Laotian partner, Unity Capital Ltd, by offering consumer finance products.
These will initially include loans for cars and hire-purchase products such as mobile phones and electrical appliances. Instalment loans for furniture will follow later.
Currently, Krungsri Leasing Services has only one branch in Vientiane and targets opening one branch each in Pakse, Savannakhet and another province by 2017.
BAY, the lion's share of which is owned by the world's largest financial group, Mitsubishi UFJ Financial Group, seeks to expand into Vietnam next year.
The bank has considered using the partnership and asset acquisition model for expansion in Vietnam, but it has not reached any conclusion yet.
"We set the break-even point of each market at three years and it should begin to generate profit from the fourth year," Mr Thakorn said.
Separately, Krungsri Consumer, BAY's unsecured loan business unit, is expected to miss its new loan and customer targets in 2014, due largely to the gloomy economy.
Total portfolio of unsecured finance, including credit cards and personal loans, was estimated at 310 billion baht at the end of last year.
For 2015, it aims to expand loans outstanding to 320 billion baht, with credit cards being the major contributor, in line with the higher income of credit cardholders. BAY, however, has set a flat rate growth for personal loans because of the lower debt-servicing ability of low-income earners in particular.
Target groups for its credit cards and personal loans are quite different.
Krungsri Consumer's credit cardholders have a monthly income of 30,000-40,000 baht on average, compared with the minimum monthly income requirement set by the central bank at 15,000 baht. The company requires applicants for other personal loan products to have a minimum salary of 10,000-15,000 a month.
"The lower debt-servicing capability of personal loan applicants bars them from accessing loan products, though loan criteria remain unchanged," Mr Thakorn said.