At the same time, commercial banks have to comply with the central bank's new regulations. International Accounting Standard39 (IAS39) and Basel II must be implemented by the end of 2006 and 2008, respectively.

In a tougher environment, it will not be easy for the new players to grow significantly.

As new and small banks, they suffer disadvantages compared to existing larger institutions in such aspects as customer base, branch networks, technology systems and capital base. They will find it hard to expand market share so keeping their existing customer base is likely to be the best way for the newcomers to survive.

Of the five newcomers, Tisco Bank positioned itself as a universal bank, while Kiatnakin Bank, Land and Houses Retail Bank and ACL Bank stood for the niche bank concept. GE Money Retail will return its banking licence to the Bank of Thailand after its acquisition deal with Bank of Ayudhya (BAY) is completed.

Among the five new banks, Tisco, Kiatnakin and GE are quite strong in terms of customer base because they have a long relationship with clients. Tisco and Kiatnakin have similar experiences as they were upgraded from finance firms, while GE has also operated a financial business in Thailand for a long time with aggressive strategies.

GE Money Retail bank, which is US-based, is likely to have a opportunity to do business here after its parent GE International Holdings decided to purchase a 25-per-cent stake in BAY, the country's sixth-largest bank. This will benefit both financial institutions.

With GE's strength in capital base, consumer finance expertise and IT systems, and BAY's advantage in customer base and network branches, the two can make a good synergy.

Once the deal is completed, GE will mainly oversee the retail banking business. As a result, BAY is expected to be aggressive in this sector this year.

Although Tisco and Kiatnakin have similar core businesses in auto loans, the two banks differ in business strategies.

Tisco uses partnership cooperation as a method to expand its businesses and customer base. It currently has three core partners.

Tisco has benefited from Mizuho Corporate Bank by sharing customer bases with the Japanese institution. The bank also benefits from Ayudhya Allianz CP Life, Thailand's third-largest life insurer in terms of total premiums, as its partner in the bancassurance business. Its other partner is Deutsche Bank.

The strategy, however, has not yet shown clear results for the bank. Most income is still generated from interest on loans, of which 70 per cent comes from automobile loans.

Kiatnakin Bank also maintains auto hire-purchase loans as its key business. The bank concentrates on small and medium enterprises and real-estate loans.

Positioning itself as a niche bank, Kiatnakin has a policy that customers do not need to use all the products of the bank. However, each client will be offered specific products that are suited to him or her. Besides, the financial products of other banks are also available at Kiatnakin.

The strength of the niche bank is a strong base of high-value deposit customers with whom it has a long relationship.

Kiatnakin also plays pricing strategies to maintain its customer base. The bank has an aggressive strategy to give customers deposit rates 25 to 50 basis points higher than large banks.

Land and Houses Retail Bank has set out its stall as a niche bank that provides housing loans.

The bank earlier offered mortgages mainly to home-buyers in the Land and Houses (LH) group, which holds the largest market share in the local property sector. The group affiliates are LH, the country's largest real-estate developer, Quality Houses and Asian Property.

But with higher competition in the mortgage market, the small niche bank adjusted its business strategy to provide loans to customers outside the LH group. The proportion of loans offered to home-buyers outside the group is targeted to increase to 30 per cent by the end of this year.

Moreover, the bank has advanced its branch expansion strategy by opening new 10 outlets per year. That means it will use more funding and its break-even target will delayed to the end of this year.

ACL Bank, though having a full-service licence for more than a year, does not yet have much public recognition. Brand-building is the key goal for the bank this year after its core banking system has been fully developed. The new player plans to conduct more aggressive business this year, particularly in the provinces.

Its main target customer groups are provincial high net-worth business operators, ranking in the top 100 in each region.

ACL will target its lending to corporations, SMEs and retail banking. It will use its advantage as a small bank by offering fast service and flexibility. This is another strategy for the bank to survive amid higher competition.

Somruedi Banchongduang

The Nation