Krungsri, the marketing name of Bank of Ayudhya Plc (BAY), positions itself as a regional bank under its medium-term business plan.
The bank capitalises on the financial expertise and international networks of its Japan-based parent, Mitsubishi UFJ Financial Group (MUFG), to expand its presence in the region.
The three mega-trends of the Asean market -- high economic growth potential, Asean connectivity, and the positive growth of smartphone and mobile banking users -- will facilitate Krungsri's business expansion in the region, said Pairote Cheunkrut, Krungsri's chief strategy officer.
HIGH GROWTH OF ASEAN ECONOMY
Asean, covering 10 countries in Southeast Asia, is a key region with a high economic growth potential which attracts large amounts of foreign direct investment. Offshore investors have been relocating manufacturing bases to the region, while regional consumption has been increasing in line with the middle-class expansion.
The growing adoption of online platforms, especially social media and e-commerce channels, has strengthened Asean connectivity. At the same time, higher accessibility in smartphone devices has contributed to the growing number of mobile banking users. These factors will support overall business expansion in the region.
With this scenario, Krungsri set its Medium-Term Business Plan of 2021-2023 as the expansion of its banking business in Asean under two business strategies, namely Taking Krungsri Beyond Thailand and Taking Customers Beyond Thailand.
KRUNGSRI REGIONAL FOOTPRINT
Mr Pairote said the bank would grow its regional business under the strategy of Taking Krungsri Beyond Thailand through regional investment. Krungsri currently has a presence in five regional markets: Laos, Cambodia, Myanmar, the Philippines, and Vietnam.
Krungsri, Thailand's fifth-largest lender by total assets, has been building its Asean footprint in Laos as the first regional market by opening its branch in Vientiane. In 2014, the bank set up Krungsri Leasing Services Ltd (KLS) in the neighbouring country to offer automotive loans and personal loan products. Currently KLS is headquartered in Vientiane and has another branch in Pakse.
As of March 2021, total outstanding KLS loans in Laos were at 5.2 billion baht with 27,200 loan accounts.
In 2015, Krungsri received approval from Myanmar's regulator to set up a representative office in Yangon.
The bank invested in Cambodia in 2016 by fully acquiring Hattha Kaksekar Ltd (HKL), Cambodia's fourth-largest microfinance lender. In 2020, HKL was upgraded to a commercial bank under the name Hattha Bank Plc, offering deposit and transactional banking services in addition to loan products.
As of June 6, 2021, Hattha Bank had total debt outstanding of US$1.32 billion with 177 physical branches and 137 ATMs. Hattha Bank expanded its total customer base to 469,000, of which around 30,000 are on its digital banking platform. Recently Hattha Bank launched the Thai-desk service to facilitate Thai corporates and entrepreneurs doing business in Cambodia.
"With strong growth of Hattha Bank, we aim to offer full-range financial services and products and upgrade Hattha Bank to become a comprehensive commercial bank for the medium to long term," Mr Pairote said.
In 2020, Krungsri acquired a 50% stake in SB Finance Company Inc, marking its first foray into the Philippines with plans to grow the banking business through digital platforms in the regional market. As of April 30, 2021, the bank had booked a total loan portfolio of 6.04 billion Philippine pesos with 309 branches and 27,590 customer accounts.
Lately, Krungsri entered the Vietnamese market in August 2021 through a 100% stake acquisition in SHB Finance, a consumer finance subsidiary of Saigon-Hanoi Commercial Joint Stock Bank (SHB). Krungsri had explored business expansion in Vietnam for several years before completing the acquisition agreement with SHB, Vietnam's top 10 retail loan provider, and is waiting for an approval from regulators on its business plan.
ASEAN GREATER OPPORTUNITIES
Taking Customers Beyond Thailand is another Krungsri strategy helping Thai businesses growing in the region. With major shareholder MUFG's international networks and products, and Krungsri's financial expertise, particularly in global markets, clients' regional expansion would be supported, Mr Pairote said.
MUFG has more than 2,500 networks in more than 50 countries worldwide and representation in seven Asean countries with around 20 offices. With the strength of both MUFG and Krungsri, the bank would continue to provide financial solutions to all customer segments including corporate, small and medium-sized enterprise (SME), and retail.
Business matching is the bank's key service when opening greater business opportunities for local SMEs to expand to regional markets. The bank began the Krungsri-MUFG Business Matching project in 2015 to connect Japanese and Thai business operators, then expanded to regional business operators, and then conducted virtual events in 2021 amid the Covid-19 outbreak.
CROSS-BORDER FINANCIAL SERVICES
With positive growth of cross-border trade, the bank supports cross-border financial solutions for customers in several services and products under collaboration with MUFG.
Rising Asean intra-regional trade has seen the growth of cross-border digital payments, and Krungsri has developed a digital platform to support it. The bank has adopted cross-border QR Code payments between Japan-Thailand, Thailand-Indonesia, Thailand-Vietnam, Thailand-Cambodia, and Thailand-Laos.
The bank has also been developing cross-border money transfers based on digital technologies. Krungsri currently offers cross-border remittances to 220 countries in 15 currencies.
AMBITIOUS GOAL FOR ASEAN GROWTH
Mr Pairote said Krungsri has been on the regional banking journey after it started building up its Asean footprint in 2014, with the net income of regional banking business now accounting for 4% of the bank's total net income. Krungsri aims to increase this income ratio to 10% by 2023 under the bank's mid-term plan.
Krungsri has been searching for new opportunities and investments in Asean through organic and inorganic growth. There are some inorganic deals in the pipeline. Under the mid-term regional business expansion plan, the bank aims to have a presence in all 10 Asean countries through different business models.
"We're going on a regional bank journey and targeting a footprint in all 10 Asean countries in different forms depending on regulations, business opportunities, market competition, customer demand and behaviour," Mr Pairote said.
