Driven by the growth potential of Asean economies, large local banks are likely to see significant opportunities to expand their regional business and enhance their revenue prospects, according to Fitch Ratings Thailand.
Regional business expansion of large local banks rose markedly in 2023 after multiple cross-border acquisitions led to substantial overseas loan growth during 2020-22.
The international loan portfolio of domestic systemically important banks (D-SIBs) surged to 10% of total outstanding loans, up from 6% in 2020, said Jindarat Sirisithichote, associate director for financial institutions at Fitch Ratings Thailand.
In Thailand, there are six D-SIBs: Bangkok Bank (BBL), Kasikornbank (KBank), Krungthai Bank (KTB), Siam Commercial Bank (SCB), Bank of Ayudhya (Krungsri) and TMBThanachart Bank.
Among this group, BBL, KBank, SCB and Krungsri have greatly expanded their operations into neighbouring countries.
However, Ms Jindarat said the foreign operations of local banks remain relatively small, accounting for less than 1% of each bank's total assets, except for BBL, which posts double-digit figures because of its extensive experience in this sector.
With robust growth in Southeast Asian economies, particularly in Vietnam, Indonesia and the Philippines, she said there are ample opportunities for Thai banks to expand regionally.
Fitch anticipates Thai banks will continue to grow internationally in a progressive manner by establishing branches and seeking acquisitions.
This strategy supports banks' efforts to diversify their revenue streams and apply locally gained expertise in similar overseas markets.
"We believe the international expansion of large local banks is based on fundamental strategic factors that should re-emerge this year," said Ms Jindarat.
In February, SCB announced an agreement to acquire a 100% share in consumer finance lender Home Credit Vietnam.
The acquisition deal is slated for completion in the first half of 2025 and is expected to support the bank's international banking business in the longer term.
For 2024, KBank anticipates revenue growth of about 20% for its international banking business, following a 25% gain last year.
Krungsri aims to elevate its revenue from this segment to 25% in three years, up notably from 14% registered in 2023.
BBL, the nation's largest lender by total assets and a leader in international banking business, intends to maintain the segment at around 25% of the total loan portfolio over the next few years.
Ms Jindarat said regional business opportunities prompted the Thai corporate sector to expand offshore, with overseas direct investment posting a remarkable 223% increase over the past decade (10-year compound annual growth rate of 12%).
The burgeoning global footprint of Thai corporations provides a built-in customer base for Thai banks venturing into international markets, according to Fitch Ratings Thailand.
However, she said Thai banks will encounter intensified competition in the regional banking arena from global peers, who are equally focused on expanding their presence in the region.