• 
• 

Published on January 4, 2008

Fiercer competition makes their mission to be "small but beautiful" more difficult.

Some small banks, such as ACL Bank, Land and Houses Retail Bank (LH Bank) and Kiatnakin Bank, had positioned themselves as niche banks, but now only Kiatnakin continues to pursue its original vision. The other two are seeking outside help.

One analyst at a local research house warns that local banks, especially smaller ones, will find it difficult to survive as a niche bank. Hardly any are operating exactly along these lines. All of them are full-service commercial banks, but some are not yet competing in terms of financial products or services.

"Under the niche-bank strategy, they must offer a very unique product or service to survive and grow the business. But there is no bank really adhering to this concept, so finally they must move to the universal-banking concept," the analyst said.

Meanwhile, the Bank of Thailand (BOT) is encouraging smaller banks to speed up strengthening their business, in order to cope with greater competition from both local large banks and international financial institutions. Phase 2 of the country's financial-sector master plan provides for more financial liberalisation leading to tougher competition in the banking industry.

ACL Bank, a unit of Bangkok Bank, was indirectly forced by regulations to invite a new partner. Under the central bank's "one presence" rule, Bangkok Bank had to sell its entire 19.3-per-cent stake in the small bank by the end of last year.

The country's biggest bank chose the Industrial and Commercial Bank of China as the buyer and is working on completing the deal.

Bangkok Bank chairman Chatri Sophonpanich, however, believes that even without any strategic partner, the bank's subsidiary will still survive.

But the banking business is much tougher now.

LH Bank is an affiliate of the Kingdom's largest residential developer: Land and Houses (LH). With a clear strategy, its major shareholders recently planned to upgrade the small institution to a full-scale commercial bank under the universal banking concept. The bank also expects to list on the Stock Exchange of Thailand next year.

The bank's two major stakeholders, LH and Quality House, are owned by real-estate tycoon Anant Asavabhokhin. LH Bank plans to increase its capital this year by offering new shares to both existing shareholders and the new strategic partner.

LH Bank has registered capital of Bt3.4 billion. When its shareholders' equity reaches Bt5 billion, it will apply for a commercial banking licence from the BOT. LH Bank concentrates on mortgage loans, which represent 80 per cent of its loan portfolio.

Thai Credit Retail Bank executive chairman Chulapracha Soonthornsaratoon said several foreign financial institutions had expressed interest in investing in the bank as a strategic partner.

The foreign bank wants to expand operations in the region by acquiring local bank shares to patch together a business network.

"The bank may have a foreign strategic partner to strengthen our business in the future, particularly in terms of capital base, know-how and networks. Even though the bank can still keep running, it needs a strategic partner to make it grow rapidly," he added.

Kiatnakin Bank is expected to need a business partner to strengthen itself in areas in which it is still new, particularly foreign business. Over the next three years, it plans to expand into the international financial arena, where its expertise may be quite thin.

"Although the bank does not need foreign shareholders, we may have a foreign strategic partner to support the bank in its weak areas. So, the bank may seek a foreign partner in the next few years," chairman Supol Wattanavekin said recently.

Tisco Bank has similar plans. It does not need a strategic partner to buy its shares but is looking for business partners for financial services under its universal-bank policy.

Thanachart Bank upgraded itself from a small to a mid-sized bank after offer shares to Scotia Bank. The Canadian bank now owns 24.98 per cent of the local bank and wants to increase that to 49 per cent.

 Somruedi Banchongduang, The Nation