CIMB Thai delays Vientiane branch
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CIMB Thai Bank's plan to open its first overseas branch in Vientiane this quarter has been put off to next year because it needs more time to prepare.
“The process of branch establishment is going on but the documents for applying for the licence are not completed yet, so the first branch should be seen next year,” Narongchai Wongthanavimok, chief financial officer, said last week.
CIMB will spend around US$25 million to set up the branch in line the Bank of Laos’ requirements.
The branch will focus on SMEs because the bank has a strong customer base in the Northeast of Thailand, especially SMEs in Udon Thani.
The first phase of the Vientiane operation will be retail banking. The bank will go after high net-worth customers in Laos before expanding to the leasing business.
Bank of Ayudhya, Thailand’s fifth largest bank, recently set up a leasing business in Laos with a local company to cash in on the demand for auto loans there.
The arrival of foreign banks including Thai banks in Laos, however, is under the scrutiny of the Bank of the Lao PDR, according to Od Phongsavanh, managing director of Phongsavanh Bank, the country’s largest commercial bank.
The central bank is keeping a close watch on the possibility of a bubble blowing up in Laos after seeing massive investment by foreigners. The central bank is planning to require huge registered capital for new foreign banks to ensure that they have a strong capital base and can help improve the economy for the long run.
Trade between Thailand and Laos presents opportunities for Phongsavanh Bank to increase fee income. It plans to seek additional cooperation from Thai banks to facilitate transactions with Thai companies.
“Foreign investors prefer using credit from foreign banks rather than local banks including us, so we have shifted focus to transactional services such as payments. However, we have supported some Thai SMEs with a credit line of Bt30 million-Bt50 million,” he said.
Phongsavanh Bank has outstanding loans of Bt900 million. However, it is burdened with a high cost of funds of around 30 per cent because Laotians prefer saving over borrowing. The bank has not launched a deposit campaign for two years to cool down customers’ interest in deposit products.
The average interest rate for deposits is 6 per cent versus 9-12 per cent for loans.
