Banks rush for share of trade finance pie
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THE COUNTRY'S banks are facing a degree of pressure in terms of their margins from international trade finance, with a slowdown in the country's exports and imports causing them to focus on business sectors offering better growth prospects.
According to Kasikornbank, market leader in the segment, competition in trade finance among Thai banks has intensified as the number of new potential exporters and importers seeking such financing has fallen, often causing several banks to go after the same targets.
“As the market leader, we have to maintain our market share of 20-21 per cent and keep growth of our trade-finance business at 6 per cent,” said Chongrak Rattanapian, executive vice president of KBank.
Last year, Thailand’s overall trade grew 1 per cent, but KBank’s trade finance expanded by 6 per cent.
The bank’s export trade finance grew 19 per cent, while import trade finance dropped by 5 per cent, higher than the 3-per-cent fall in the country’s overall imports, he said.
KBank continues to capture business in the auto, electronics and gems and jewellery sectors, which are enjoying healthy export growth, even though overall Thai exports in January fell 2.6 per cent on a year-on-year basis.
Exports of autos and gems and jewellery grew by 11 per cent, while electronics shipments expanded 6 per cent.
A key strategy of the bank is to have a full range of trade-finance products and support exporters that have exposure in the US, European Union and Asean, and especially Singapore, which are all major trading centres, said Chongrak.
The bank believes exports remain a key economic driver for the Kingdom, even though their ratio to gross domestic product is gradually declining.
He said the slowdown in export volumes was caused by two main factors – trading partners having lower demand as their economies have yet to recover significantly, and the appreciation of the baht.
“However, if we look ahead, Thailand will still rely on trading activities. Connectivity in Asean will bring more trade flows and when the logistics system in the region is improved, the transportation of goods will be more easy, resulting in exports and imports increasing in the future,” he added.
Moreover, Thailand can import goods from neighbouring countries where there are lower production costs, therefore trade activity is unlikely to decline, while improved connectivity will help boost trade, and consequently, trade finance too, said the executive.
International trade finance is important to KBank’s corporate business division, contributing one-third of its income.
A total of Bt4 billion was generated from this source last year.
