ICBC (Thai) expects to maintain 10% annual asset growth
THE influx of Chinese investors in Thailand and a market with room to grow are enough for Industrial and Commercial Bank of China (Thai) to maintain annual asset growth of 10 per cent for at least the next couple years, a top executive says.
Zhigang Li, chairman of the board of directors and the executive committee, said asset growth of 10 per cent per year would ensure that ICBC (Thai) would remain in the parent group’s top three in terms of assets and profit generators in the Asean countries.
In the first six months, ICBC (Thai) posted asset growth of 10 per cent while net profit grew by 15 per cent. Li said net profit exceeded the target because the bank participated in financing deals such as a bridge loan to fund TCC Group’s acquisition of Big C Supercenter from Casino Group. It also is the biggest guarantor for True Move H’s acquisition of a spectrum licence for 4th-generation wireless service.
In the first half, ICBC (Thai) granted loans to Chinese investors who came to Thailand to set up rubber-tyre and solar-energy businesses.
Li said rubber would be a key driver of ICBC (Thai)’s asset growth because Thailand is a rich source of rubber for Chinese tyre companies. The bank provided Bt10 billion in financing to Chinese tyre manufacturers setting up factories in Rayong.
China’s Huayi Group recently announced the investment of Bt10 billion in Thailand by joining with Lakchai Muang Yang Industrial Estate to produce tyres for export.
According to the Board of Investment, Chinese companies ranked third among foreign interests requesting investment incentives, for total investment value of Bt21 billion.
More Chinese companies are coming to Thailand because their government has encouraged them to invest overseas, while the slowdown of China’s economy has encouraged manufacturers to go abroad to improve efficiency. Thailand is a good location because it is a centre of Asean, and it is a base for manufacturers of rubber products because they can acquire raw materials at lower prices than elsewhere.
“We hope to maintain [healthy] growth in the second half. Actually, the Thailand market is not too big and we are very small for this market, so I think this market is [large] enough for us to grow [in], and we are a Chinese background bank that helps customers connect to other markets,” Li said.
Thailand’s gross domestic product in the first half grew by around 3 per cent, and the outlook for second half is good because of many large projects to be launched by the government and the 10 target industries it is pushing to attract foreign investors.
Last month, ICBC (Thai) joined a delegation organised by the Thai government to promote these 10 industries to Chinese investors, he said.
“Most importantly, ICBC Group has [a global network], hence ICBC (Thai) will be the choice of corporates from China and international markets who intend to invest here.
“Thailand has a strong supply chain to accommodate upstream to downstream industries, as we have seen Japanese companies in Thailand control automobile and electronics [industries] because of the supply chains,” he said.
Local corporates make up 50 per cent of the bank’s portfolio, followed by Chinese firms at 30-40 per cent and multinationals (10-20 per cent).
Asked if it was possible for the bank to increase the proportion of Chinese customers, he said doing so would not be too difficult, but competition in this market is furious, so the bank needs to offer better services and products.
ICBC (Thai) has an advantage because its parent company has an international network. Moreover, each of its subsidiaries worldwide can support one another. ICBC (Thai) can handle trade finance and also help customers who want to issue debentures in Hong Kong, Singapore or London.
ICBC branches overseas can help raise funds in those countries, which local Thai banks cannot. And it can provide loans not only in baht but in yuan and US dollars, he said.
ICBC (Thai) collaborates with local banks because the single lending limit has to be considered, as its asset size of Bt183.03 billion is small compared with Thai banks. So, it has to join local banks in syndicated loans, as it did with True Move H.
Li believes his bank will not have problems over the next several years financing its clients because it has allocated some of its annual profit to strengthen its capital. Its capital adequacy ratio is 17.85 per cent, higher than the 8.5 per cent required by the Bank of Thailand.
Even though the bank has high exposure to corporates, its non-performing loans are only 0.94 per cent of total lending because it has leveraged the risk-management know-how of the parent group, Li said.
Corporate loans account for more than 50 per cent of its total assets, small and medium-sized enterprises account for 10-20 per cent and retail customers 30 per cent.
