PENANG, MALAYSIA : Competition in the banking industry has intensified in recent years, driven by aggressive branch expansion and marketing campaigns. And now the battleground has shifted to Asean.
Senior executives of BBL answer questions at a briefing yesterday.
Kosit Panpiemras, executive chairman of Bangkok Bank (BBL), the only local bank that has established an international service, said investment in time and human resources is the key to success.
With its clear policy of sustainable growth, the bank has been strengthening its business for 58 years.
Thailand's largest bank by assets opened its first offshore branch in Hong Kong in 1954. It has since established 26 networks in 13 countries including key economies.
Indonesia's Surabaya was the location of its last branch opening in March. The bank plans to open another outlet in Medan in Asean's largest economy.
Mr Kosit said the bank pays attention mainly to strength and stability, so it needs to invest in time and human resources to develop the business.
"We will open a new offshore branch when we are ready with a customer base and staff, particularly locals who understand that market," he added.
Basically, BBL sets a breakeven point of three years for each offshore branch, but it has generally achieved that target earlier than planned.
Asean's southern area is the bank's key focus, mainly due to potential economic growth, despite current lower growth than northern emerging markets. Myanmar and Laos have growth rates of about 10%, compared with 5-6% in Indonesia and Malaysia.
BBL has operated a representative office in Myanmar for 17 years.
In Malaysia, the bank has five branches under its banking licence of Bangkok Bank Berhad, 100% owned by BBL. Malaysia's central bank has allowed BBL Berhad to open four branches.
Other local and regional banks use an inorganic strategy to expand financial territory in the region in preparation for the Asean Economic Community.
Mergers and acquisitions are an important strategy of Malaysian financial institutions upgrading to regional banks in accordance with the government's policy. "But it is not a strategy for BBL now," Mr Kosit said.
He said the bank would keep an international loan portfolio at 18% of its outstanding debt for risk diversification.
BBL Berhad executive director and chief executive Robert Loke said the bank provides financial services as a local bank in Malaysia, with a significant loan portfolio under its five branches.
The bank offers only commercial loans, especially to small and medium enterprises. Malaysian customers represent the majority of borrowers, followed by Thais and overseas Chinese, particularly Taiwanese and Singaporean.
"Malaysia's positive economic outlook, with a growth rate of about 4.5-5% next year as well as trade flows over the region, will support the bank's business expansion," Mr Loke said.
BBL keeps subdued growth projection
Chartsiri: Loan growth of only 6-7%
Bangkok Bank is returning to a proactive mode in an attempt to keep its No.1 position in the banking sector amid strong competition.
President Chartsiri Sophonpanich said the bank was planning its 2013 business strategy and targets. Its five business segments _ corporate, medium-sized, small, retail and international loans _ would grow in line with the country's economic growth.
The bank forecasts Thailand's gross domestic product growth will be about 5% next year. Normally, a big bank would set an annual loan growth target at 1.5 times of GDP growth rate. The bank targeted loan growth of 6-7% for this year.
Thanks to the industry's strong growth over the past few years, the gaps between the rankings of banks are narrower. By asset size, BBL is the largest, followed by Krung Thai Bank, Siam Commercial Bank and Kasikornbank.
As of September, Krung Thai Bank overtook BBL in terms of loans with a portfolio of 1.48 trillion baht, compared with its rival's 1.43 trillion baht. Meanwhile, Siam Commercial Bank brought its loan portfolio up to equal that of BBL.
Yet, in terms of assets, BBL remains No. 1 at 2.28 trillion baht, followed by Krung Thai Bank at 2.24 trillion baht and Siam Commercial Bank at 2.06 trillion baht.
"Ranking is the one key factor that the bank pays attention to. We want to maintain the number one position with business growth in all segments. We need an adjustment," Mr Chartsiri said.
However, he did not describe the adjustment in detail but said BBL would expand business on its existing strengths with a solid capital base under strong risk management.
The bank's BIS ratio is 15%, of which 13% is in tier-one capital, almost double the central bank's requirement of 8.5%.
"BBL does not need to increase capital for business expansion," Mr Chartsiri said.
Its net non-performing loan level is 0.85% of total debt outstanding.
About the author
- Writer: Somruedi Banchongduang
Position: Business Reporter