Customer feedback crucial to growth

Bangkok Bank opened its first overseas branch in Hong Kong in 1954. After that, it expanded to Singapore and London. In the 60s, it stretched farther to Taiwan and Jakarta, then opened two additional branches in Hong Kong.

Another wave of overseas expansion occurred in the early 90s as the world's geopolitical situation shifted and many countries opened up their economies. The bank had branched out to Taiwan and Beijing. But it took about 20 years before the bank obtained a licence to open its first full branch in China at Shantou in 2005. Later, the bank opened branches in Shanghai and Xiamen (the latter was moved recently to Shenzhen). It reopened a branch in Ho Chi Minh City after a long closure following the Vietnam War. It has also expanded to Manila.

Bangkok Bank has focused on opening its branches in the 15 countries considered the top trading partners of Thailand. Business with these countries comprises 40 per cent of Thailand's international trading revenues. Most of the bank's clients at its overseas branches are not Thai but Chinese, Taiwanese and Singaporeans with high volumes of intra-regional trading activities.

During the initial years of expansion, Bangkok Bank's overseas branches focused on trade finances. Some offshore branches - such as those in New York and London - were profitable enough to help fund the bank's other overseas branches.

What do you consider the key success factors for Bangkok Bank's overseas expansion?

The most important thing is "service-minded" orientation - understanding the needs of customers and their businesses and providing services that match these requirements. Our customers are mainly local businesses, which are different from multinational companies that have access to overseas funding. Another factor is human resources. During the 50s and 60s, we dealt mainly with tycoon-type merchants. Hence, the branch staff needed to have a type of character that understood and could serve those types of clients. The attitude of our people has to adjust in accordance with the changing demographic of our customers.

Without our customers, we cannot go far. Customers are our compasses and our rudders - if we use them right, they can help steer us in the right direction.

How do you keep staying ahead of the curve?

Our overseas offices do not make immediate profits. There were many cases where it took five years or longer for the branch to turn a profit. Therefore, we think big but grow in small increments. We often start a small overseas branch and then expand it accordingly once we learn more about the market and win over enough customers who can refer our services to other clients.

In the end, what really drives our business is the clients who help us anticipate the trends and expand accordingly. In recent years, Thai customers have moved to expanding abroad and so we have followed them.

Customers help us identify trends. For example, we have followed our Hong Kong customers into Vietnam to support their investments there. Through them, we get to know their local customers. Our bank has known

some of our largest customers since they were small businesses, such as Liem Sioe Liong in Indonesia and Kerry Group's division in Malaysia.

How does the bank design the orga-

nisational structure of its overseas offices?

Branch managers are the key. They need to have a deep understanding of local customers and the local environment. They

also have to be able to assimilate to the local culture's norm and traditions. Finally, they must have a fairly good understanding of banking.

We empower our branch managers to be leaders and we give them flexibility to make their own decisions. However, we centralise some matters, including loan approvals, which require authorisation from headquarters. The executives at our headquarters regularly fly to meet the staff at the overseas branches and, while they are there, take time to talk with the local customers.

How do you recruit and select overseas branch staff?

Recruitment activities take place at our headquarters. When a new employee is hired, he or she starts out as a junior officer. He or she will be rotated to two or three different offices before qualifying to receive a promotion.

Overseas employees tend to permanently station themselves overseas. In contrast, our domestic staff tends to stay within the country. In recent years, we began trying to encourage employees to rotate positions within Thailand and internationally. But because overseas positions paid more than domestic jobs, few expatriate staff wanted to return to Thailand. In recent years, this compensation gap has begun to close. Domestic salaries are increasing, making it easier for domestic and overseas workers to trade places with one another. Younger staff can now go to work overseas and return to work in Thailand later.

Since we can find few Thais who speak Chinese fluently, we have recently begun moving local staff from Hong Kong, Singapore and Taiwan to China. Some staff at our Vietnam branch is originally from Taiwan. They manage accounts for our Taiwanese and Hong Kong clients who are doing businesses in Vietnam. But we are still far from being the kind of global institutions that can use staff from any nationality. We still usually employ Thais as branch managers in our overseas offices, but in some countries, such as in Malaysia, the manager is a local. The heads of two of our branches in China are Taiwanese, but the second-highest ranking officers are Thai.

The management systems at our overseas branches are complex. Still, the number of employees at our 21 overseas offices totals 1,200 people, which is relatively low. Outstanding loans through our foreign offices amount to Bt200 billion, which is comparable to the loan values of any medium-size bank in Thailand. Also, we employ only 50 expatriates. This is because we would like to control our costs and lately there are more international issues related to employment protection. In some countries, such as Indonesia, we have to promote a certain number of local staff regularly.

It is important to understand the local people and their norms and traditions. Failing to do so can be damaging to the company. For instance, the laws in Indonesia may read like Thai laws but function differently in the courtrooms. In the Philippines, it is important to choose the right partners.

How does human resources play a crucial role at the bank?

In some industries, proprietary technologies or patents provide a competitive edge. In the banking business, however, there is no "hardcore" technology. Our technology is the knowledge that the people we employ possess. It is our people who interact with the clients. Our products, meanwhile, are intangible because they are electronic forms of money. So it is particularly important for our company to constantly improve the capability of our human-resources department. It is also important to enable our employees to share knowledge and collaborate with one another.

Doing business in countries that are in different stages of development is beneficial. It helps us to foresee changes that will happen so we can prepare and adjust. For example, the 1997 financial crisis prompted the introduction of many new rules and regulations. Because we had done business already in London and New York, we had seen these patterns of regulatory response and anticipated them. Therefore, having many locations - even if they are not making a profit - helps us to understand situations before they happen in Thailand.

Chartsiri sophonpanich shared his thoughts on Bangkok Bank's 54 years of overseas

expansion at the recent "Power of collaboration and learning" forum, hosted by Siam Cement Group.

pichaya@nationgroup.com