Banks adjust to 'new normal'

Speaking at a panel discussion on the banking sector, part of the recent “IAA 2015 Investment Analysts Conference”, Krieng Wongnongtaey, first senior executive vice president of Siam Commercial Bank, said gross domestic product was no longer likely to enjoy annual growth of 7-8 per cent as in the past. Under the new normal, GDP would only be able to expand by 3 per cent a year, and banking was a business that reflects the state of the economy. 

To adapt to this reality, SCB is in the process of changing the way it deals with small and medium-sized enterprises, he said.

Krieng noted that while SCB is the country’s third-largest bank, it is only fourth in terms of its share of the SME market. 

“We think we have a lot of opportunity to grow in the SME segment, but the challenge is how to attract SME customers to the bank.” To that end, the bank is targeting SMEs in corporate supply chains. 

Another strategy is to acquire new customers from new segments, and wealthy people are among the targets, Krieng said.

He said that under new normal, digital banking was the focus of several players but understanding customers was the SCB strategy in this area.

For example, SCB revamped how its automated teller machines handle money transfers after finding that 60-70 per cent of customers transfer money to the same accounts. When these customers make their next cash transfer, the ATM will show the recent accounts, he said.

Oranuch Apisaksirikul, group chief of Tisco Financial Group, said new technology was allowing non-banks to do digital banking, especially payments.

Tisco has realised it cannot ignore the trend towards digital banking but might not invest as much in such technology as the major banks have. Instead, it is concentrating on those aspects of digital services that will add value to the bank and its customers, she said.

Tisco has witnessed slower loan growth because of the downturn in auto sales. The previous elected government’s first-car tax-break programme affected used-car lending, and several auto lenders had to set higher loan-loss reserve, which had an impact on profits.

Oranuch said that although the group had set large provisions for the past few years, its net profit was stable and the interest margin had improved. As demand for loans has dropped, Tisco has not needed to chase funding, so its costs have declined and improved margins, she said.

Another growth driver at Tisco is fee income, which has gradually increased from its bancassurance and securities businesses.

Salinee Wangtal, chairwoman of the board of the Small and Medium Enterprise Development Bank of Thailand, said that when the economy slowed down, SMEs were the first to be affected. Commercial banks are more cautious in granting credit to these businesses, so SME Bank has to fill this role instead.

Even though the bank has suffered losses from this lending, it has to do it because securing SME business means securing employment as well, she said.

The name “development bank” means it has a role in helping to develop the country, and SME Bank has a clear mission to help SMEs be more competitive. The economic cycle will flow when SMEs have sufficient cash to run their businesses, Salinee said.