Baht turns CIMB Thai to SME importers
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Segment benefits from strong currency in foreign purchases
CIMB Thai Bank is now targeting small and medium-sized importers for its trade finance products after exporters became less active because of the baht’s appreciation.
Surachai Chitratsenee, senior executive vice president of SME banking, said yesterday that customer demand for trade financing should weaken from last year in line with the strengthening of the baht.
Exporters facing high costs are accepting fewer orders from abroad to avoid foreign-exchange losses. The slowdown in the export business has reduced loan drawdowns, so the bank is attempting to tap importers, since they are the segment benefiting from the strong baht.
At only 6-7 per cent, first-quarter loan growth fell short of target because of serious competition in SME banking and the sluggishness in trade financing.
However, the bank is sticking with its business plan, since it has many deals in the pipeline for the rest of this year. The bank still believes it can meet the growth target of 25-30 per cent for its Bt40-billion SME loan portfolio.
The furious competition is squeezing the bank’s net interest margin (NIM), which has shrunk by 15-25 basis points from 3.75 per cent last year. NIM this year should be around 3.6 per cent, which is acceptable for the bank; however, it will chase harder for fee income from SME customers to compensate for the contraction in NIM.
Typically, fee income comes mainly from trade finance, but with that business running into headwinds, the bank will stress cash management instead.
CIMB Thai Bank recently expanded its SME customer base to mid-size corporations with annual turnover of Bt500 million to Bt2 billion from SMEs with annual turnover of up to Bt500 million, since mid-sized corporations can help generate fee income besides interest income from lending.
Most mid-sized corporations are in the provinces, which are showing dynamic growth, driven by urbanisation and the upcoming Asean Economic Community.
CIMB Thai offers tailor-made loans to this kind of customer and standard loan products to SMEs.
SMEs that are subsidiaries of Malaysian companies are also a natural focus of CIMB Thai Bank. Recently the bank opened a credit line for ISCM Industries (Thailand) and Integrated SCM, both subsidiaries of D’Nonce Technology, a listed company in Malaysia.
