Bank of China seeks to upgrade Bangkok branch to subsidiary
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Bank of China's Bangkok branch has submitted an application to the Bank of Thailand for a licence to upgrade to a subsidiary, in a move that reaffirms the Chinese institution's confidence in Thailand despite the country's economic slowdown.
Che Jun, general manager of the branch, said yesterday that the upgrade would help the bank achieve its goal of having 20 branches around the Kingdom, from three currently, while the parent company in China wants to see its franchise in Thailand grow as a result of retail banking as well as corporate banking.
“Thailand’s market has potential, as reflected by the steady growth in gross domestic product. Even though GDP this year is expected to grow by 4 per cent, Bank of China wants to expand its business here to serve Thai customers,” he said.
The bank hopes to receive a subsidiary licence from the Bank of Thailand and the Finance Ministry by next year.
Bank of China is one of two foreign banks that have requested a subsidiary licence. Under the financial master plan II, the central bank will allow up to five foreign banks to have such a licence.
Bank of China, through its Bangkok branch, entered the Thai market 19 years ago, but only began to penetrate the retail-banking segment in 2011 by introducing credit and debit cards.
Jun said the provision of mortgages represented an important development in strengthening its retail banking in the Kingdom.
Yesterday, Bank of China officially launched a mortgage scheme to cater to buyers of new homes, as well as refinance customers.
The bank projects outstanding home loans of Bt5 billion within three years, said assistant general manager Pan Xinyuan.
Phonpimol Pathomsak, head of the personal credit department, said that as a new player in the mortgage industry, the bank must provide different solutions to customers by highlighting long-term low rates.
Joining forces
The bank is joining forces with big-name developers and listed property companies to promote loans to home-buyers, she said.
“Property projects are a channel of application as well, because we currently have only three branches. Yet, the number of branches is not a problem, because [other] foreign banks in the Thai market are able to secure retail-banking customers despite having just a few branches,” she added.
The bank claims that its interest rate for buyers of new homes is the lowest in the mortgage industry, at 5 per cent on average throughout a 30-year contract.
For refinance customers, the first-year rate is 3.5 per cent, followed by 5.5 per cent for the second year, 6.5 per cent for the third and then 6.75 per cent for the remainder of the contract. The average rate for refinance customers is 6.5 per cent.
“We are telling customers that they should think about the interest burden throughout the contract rather than just in the first three years, which is the fixed-rate period. Our product offers a floating rate in the first years to ease the burden on customers,” said Phonpimol.
The bank offers home-buyers its minimum lending rate minus 1 percentage point in the first two years, then MLR minus 2 percentage points for the third year onward. Its MLR currently stands at 7 per cent.
The long-term low-rate strategy will also help prevent the need for refinancing, she said, adding that a study by the bank had found that home-buyers preferred not to have to refinance even if it relaxed their interest burden.
They are concerned over the time it takes to shop around and consider the interest rates at many banks, besides which there are other costs incurred in refinancing, she said.
Bank Of China is targeting mid-to-high-level customers who can afford to buy a home costing around Bt5 million, which means they should have a monthly income of Bt70,000.
Even though it currently has only three branches in the country, the Bangkok operation has Siam Commercial Bank as a payment-gateway partner.
It is looking for additional payment channels to facilitate mortgage customers in the future, she said.
