DESPITE the proliferation of technology, Thai banks still see a necessity to establish a physical presence. In this regard, Thailand’s largest bank, Bangkok Bank, is in the best position to cash in on the Asean Economic Community (AEC) with its presence i
BBL’s international loans – those extended to businesses outside Thailand – account for 18-20 per cent of its total lending.
Maintaining physical branches is a key strategy for BBL, and it has been ready to open more branches in each country if it sees significant activities from customers.
Its strategy for Indonesia speaks to this. After opening a branch in Jakarta, BBL scaled up its presence with the opening of two more in Surabaya and Medan to satisfy demand from Thai and multinational companies. A year after the opening of the two additional branches, Indonesia is now the bank’s second-biggest overseas market in terms of loan approvals, of the 14 markets it has been operating in.
The same strategy will be applied with its expansion plan in Laos. It already has a branch in Vientiane, and will soon open one more in Pakse, in the country’s south.
Kobsak Pootrakool, executive vice president for international banking at BBL, said digital banking might suit individual consumers, but for corporate banking, especially overseas, physical branches and local knowledge were needed.
“A key to banking overseas is understanding the regulations. We have to use local knowledge to contact regulators and clients. The lending process needs to use people, so having physical branches is meaningful for the bank when conducting corporate banking overseas,” he said. BBL is the only Thai bank to receive a foreign banking licence in Myanmar.
Connectivity in Asean is an advantage for BBL when offering integrated services. The bank has set up an Asean Connect Desk at its headquarters in Bangkok to advise entrepreneurs wishing to do business in both Asean and border provinces.
Chartsiri Sophonpanich, president of BBL, has said the bank has to understand the development of each business, and lending is not always the answer for clients.
“To step into Asean, enterprises have enough funds, but what they want to know is how financial institutions will help them conduct offshore business successful. Therefore, advisory service is the first focus for BBL. When those businesses develop, funding will be the next stage,” Chartsiri |said.
Physical presence also matters for other Thai banks that want to establish footprints overseas, particularly in Asean. But only large banks find this palatable as branches require a major investment.
The option for smaller banks is to focus more on facilitating border trade.
Kasikornbank is putting more effort into this, as its only Asean presence outside Thailand is in Laos. A wider presence is needed to connect trade flows and investment from clients in China, where the bank has four branches and three representative offices.
According to Teeranun Srihong, a co-president of KBank, Asean presence is a must because in the next decade, Asean+3 – the 10-nation bloc plus China, Japan and South Korea – will mean revenue from overseas offices will become significant. Trade finance is the focus, as Asean integration has attracted trade activities within the Asean+3 countries.
The bank wants to have branches in Cambodia, Vietnam and Myanmar. If approved, KBank plans to upgrade to a local bank in China next year – to be the second Thai-owned local bank there after BBL. Elsewhere, business will be grown with help from partner banks – considered an indirect way to establish a physical presence.
Siam Commercial Bank will open a branch in Ho Chi Minh City early next year, which will be SCB’s sixth in Asean after one in Vientiane and four in Cambodia. Myanmar is also in its sights, and it is working there with local banks and its strategic partner, Mizuho Bank, which is one of nine foreign banks in Myanmar.
The bank sees CLMV – Cambodia, Laos, Myanmar and Vietnam – as a potential growth market, appealing to foreign investors because of huge demand for development.
Krungthai Bank has branches in Laos, Cambodia and Singapore. It has also established partnerships with local banks in Vietnam and Myanmar. Border provinces are the bank’s focus.
Small and medium-sized banks may find it hard to follow in large banks’ footsteps.
Anuwat Luengtaweekul, executive vice president at Thanachart Bank, said it would do more to serve clients expanding overseas, but this would be done through more foreign-exchange booths along borders and a business centre for small and medium-sized enterprises. It will also establish a digital platform to serve Thai clients’ e-commerce activities in Asean. Kiatnakin Bank president Aphinant Klewpatinond said that as his bank could grow business outside Thailand through loan syndication, a physical presence was not the right answer. Syndication will help the bank familiarise itself with businesses in Asean, and KKP’s expertise, particularly in investment banking, could strengthen its business.
Though others are competing hard for a bigger presence in the region, KKP would rather focus on its priority – wealth-management service for rich Thais.
Noriaki Goto, president and chief executive of Bank of Ayudhya (Krungsri), which is a member of the Mitsubishi UFJ Financial Group (MUFG), said physical presence mattered in countries where a significant proportion of transactions are cash-based. With a presence all over the world, the Japanese bank has catered to business demands through digital platforms as well as branches.
He said banking was all about creating and maintaining relationships with customers. Therefore, while digital banking serves this end by offering day-to-day banking at their customers’ fingertips, a value-added personal touch for consultancy for complex decision-making could strengthen the relationship.
“The key is, therefore, to build a balanced digital platform in parallel with strategically located physical branches and enhanced personal services, to enjoy the highest levels of customer loyalty,” he |said.