Krungsri aims to become top-tier financial group within three

Krungsri (Bank of Ayudhya) expects to achieve double-digit lending growth over the next three years, supported by three strategic thrusts and a major investment in increasing the number of branches to close to those of the top four banks in Thailand.

Under its mid-term business plan, covering 2015-17, Krungsri aspires to be a top-tier financial group in Thailand via the expansion of assets, increasing fee income and reducing funding costs.

Noriaki Goto, president and chief executive officer of the bank, said yesterday that if the bank met its goals in these key strategic areas, annual lending growth over the period could be in double digits.

This year, Krungsri projects loan growth of 7-9 per cent, compared with 7.3 per cent last year.

Before its merger with Bank of Tokyo-Mitsubishi UFJ (BTMU), Krungsri posted double-digit growth, before witnessing single-digit growth due to the economic slowdown and demand for auto loans falling sharply when the government’s first-car tax-break programme ended.

Krungsri is the second-largest auto instalment lender and the market leader in overall retail loans, which account for 40 per cent of its loan portfolio of Bt1.2 trillion.

To become a top-tier financial group in Thailand, the fifth-largest bank by assets acknowledges that it must close the gap with the top four in terms of the number of branches, said Goto.

Krungsri currently has 655 branches, compared with more than 1,000 for each of the four major players.

Within three years, Krungsri will add 100 branches and 2,000 automated teller machines (ATMs), he said.

Goto added that Thailand remained much more reliant on cash as a tool for settlement than other countries, and even though the top four banks were likely to scale down their number of branches, Krungsri was in growth mode – and therefore having more branches was essential for the bank in expanding its customer base and increasing competitiveness.

When the bank achieved a larger customer base, its assets would expand as well, he said.

Moreover, it will attempt to increase the number of current accounts and savings accounts through transactional banking in order to reduce the cost of funding, apart from receiving low-cost funding from its parent company, Mitsubishi UFJ Financial Group.

Under its mid-term business plan, Krungsri will maintain market leadership in consumer finance, but will be prudent in the provision of credit to retail clients amid high household debt and the economic slowdown, said the bank’s chief.

He said the loan-growth target of 7-9 per cent for this year was likely to pose a challenge, after witnessing a contraction in the first quarter.

However, the bank still has room to achieve the target due to its synergy with BTMU to tap Thai corporates, many of which are investing more in offshore markets, and multinational companies.

The activities of corporates will lead to an increase in fee-based income for Krungsri, he said, adding that corporates will be a key driver of lending growth for the bank, even though the segment will dampen its net interest margin.

The bank’s net interest margin this year is projected at 4 per cent, against 4.32 per cent in 2014.

Krungsri’s goal over the next three years is to become the "house bank" of commercial clients and to increase its market share for corporate lending, where it is currently ranked fifth with 8 per cent, Goto said.

Meanwhile, he said he remained optimistic about the Thai economy’s prospects despite first-quarter growth coming in lower than expected, with public spending being a key driver.