Exim looks for new business model

 

Exim banks in the United States and Japan will be included in the focus of the study, said Pisit Serewiwattana, president of Exim Thailand.

“The consulting company has also been asked to study which of Thailand’s strengths should be promoted, and find the best model for us under the Thai regulatory context. That will demand that it talks with relevant agencies in Thailand,” he said in an interview.

At the end of March, Exim Thailand’s outstanding loans stood at Bt73.6 billion, a slight increase from Bt73.54 billion at the end of 2015. First-quarter net profit of Bt273 million convinced the bank that it would achieve this year’s target of Bt1.2 billion. However, that target is about 30 per cent lower than last year’s net of Bt1.5 billion. The outlook is not bright, as commercial banks’ operations overlap most of Exim Thailand’s.

Established 22 years ago, the bank was designed to promote exports to destinations where Thai commercial banks had no footprint. However, most of those markets are developed and, with more extensive information, are no longer fearsome to commercial banks. In this scenario, Exim Bank could not efficiently compete given its small network of only nine branches and 600 staff.

“It’s a big question whether Exim Thailand is still necessary in the current context. Its role may need to be changed,” said Pisit, who began his four-year term on June 1. “Without any change, the bank will continue this way, with only small profit growth.”

The advisory contract will be signed soon, for completion of the study within 18 months.

Once a new model is agreed, |the consulting firm will have to design a training session. The law governing the bank will also need to be amended.

While waiting, Pisit has come up with ways to grow the bank’s business under the current business context. Exim Bank plans to set up a business unit to commercialise the data of Thai exporters and importers.

“When Thai companies go abroad, they have to buy data because information in some countries is not conclusive. With the data [the new unit will provide], exporters will know which buyers and reliable banks to do business with,” he said.

The bank also plans to be more active in export credit insurance, underwriting and helping small and medium-sized enterprises explore overseas markets.

According to Pisit, these are core strengths of Exim Bank that commercial banks cannot match. And the potential is bright if the service is offered for exports to “new frontier” markets like Russia and countries in Southern Africa.

“Commercial banks can be the channels where we sell our export credit insurance. We are signing a memorandum of understanding with Krungthai Bank to offer the product to [its] customers,” he said.

At the end of 2015, Exim Bank’s outstanding insurance stood at Bt15.49 billion.

Credit insurance should be a core portfolio of the bank instead of lending, he said. While large corporates can obtain loans from commercial banks, SMEs still have limited access to bank loans. Pisit acknowledged that doing more business with SMEs would mean higher operating costs: for a credit line to an SME, the processing cost is about Bt1,200 per every Bt1 million, compared with Bt300-Bt400 for a large client.

At present, only 5 per cent of Exim Bank’s customers are SMEs, but it aims to double that proportion over the next few years.