SCB banking on close partners in Myanmar, VN branch this year

SCB’s overseas business is currently quite small, and in CLMV it does not have its own branches in either Myanmar or Vietnam.

The bank does, however, have a Vientiane branch in Laos, while in Cambodia it has four branches run by its local affiliate, Cambodian Commercial Bank.

Even though it was not successful in getting a branch licence in Myanmar last year, SCB remains active in the country via business cooperation with local banks and its strategic partner, Japan’s Mizuho Bank, which has been granted a banking licence, said Arthid Nanthawithaya, deputy chairman of the executive committee and chief executive officer of SCB.

Last year, the central bank of Myanmar granted branch licences to nine foreign banks.

While CLMV as a whole is a potential growth market from all angles, SCB realises that having a strong presence there might be beyond the bank for now, therefore CLMV should be regarded as an extension of Thailand for SCB in servicing wholesale banking and transactional banking, he explained.

"CLMV [countries] are welcoming inbound activities from China, Japan and South Korea, as Thailand used to do. The inbound activities are our radar screens, especially in Myanmar," he added.

CLMV countries are at the stage of fundamental development and have attracted foreign investments, and as long as the speed of foreign investment is maintained, the countries should no longer be small income contributors to the bank, said Arthid.

He added that lending for such activities was not the problem, as SCB could support it from Thailand, but the bank was currently unable to directly engage in non-lending activities such as trade finance or cash management in Myanmar, because it did not have a banking licence.

However, through the engagement of its business relationships in Myanmar, SCB has supported trade finance to the tune of US$100 million (Bt3.52 billion) to seven Myanmar banks, including Aya Bank, CB Bank, Kanbawza Bank, Myanmar Apex Bank, Yoma Bank and Myanmar Foreign Trade Bank.

He explained that Myanmar as a country still did not have a credit rating and several counter-parties may not be comfortable about taking a risk with its banks, therefore SCB’s collaboration enabled trade transactions to proceed smoothly.

Furthermore, SCB confirms letters of credit from the seven Myanmar banks and also discounts and provides short-term financing to the extent required.

"A licence is important for foreign banks in broadening banking business abroad, but having no licence does not mean we cannot do business or build brand recognition. We have to think about the next step that Myanmar might take in the future, which might entail opening up other licences to insurance or securities businesses; therefore we need to stay active in Myanmar in order to see more opportunities in this country," said the CEO.

SCB will further collaborate with Mizuho Bank in serving Thai companies doing business in Myanmar, he said, adding that the two |partners will next month jointly support a Thai corporate that is successfully expanding its business in Japan.

To stay focused in Myanmar, the bank remains hopeful about getting a licence in the future, he stressed.

Meanwhile, the effort put into forming long-term relationships in a country has been affirmed as the right strategy for the bank, which is awaiting final approval of its application for a branch licence from the State Bank of Vietnam, he said.

In Vietnam, SCB has been operating through its joint venture – Vinasiam Bank (VSB) – since 1995.

The Thai bank holds a 33-per-cent stake in the JV, while Charoen Pokphand Group owns 33 per cent and Agribank of Vietnam holds the remainder.

Once SCB gets its licence, VSB will be liquidated and all assets and liabilities worth around $100 million will be transferred to the new branch in Ho Chi Minh City. The bank hopes that the branch will be able to commence operations at the end of this year.

Under the licence, SCB can service both credit and non-credit products such as transactional banking, include foreign exchange, to wholesale clients.

SCB will have a registered capital of $75 million in the Ho Chi Minh City branch, much higher than the minimum of $15 million required by the State Bank of Vietnam.