Return on equity (ROE) for Standard Chartered Bank (Thai) is only about half that of the industry average, but its chief sees no reason to worry, as it is well placed to wait for the country's expected recovery and renewed demand for loans.
And as more investment flows into the Greater Mekong Subregion, of which Thailand is the hub, SCBT stands ready to provide financial support.
Lyn Kok, president and chief executive officer, said ROE at SCBT was less than 10 per cent, compared with the 20-per-cent average among Thai banks. She cited the economic slowdown in Thailand, causing lower consumption and lower loan demand. However, the bank is optimistic that when consumer confidence recovers and state infrastructure projects get under way, the need for money will come, and this will benefit SCBT next year.
For now, then, the current low lending margin means the bank will have sufficient equity once the opportunity for growth comes, so an ROE of 10 per cent is sufficient.
SCBT has the highest equity in the Thai banking industry, as its core Tier 1 capital ratio is 20 per cent.
Kok has also served as Greater Mekong Subregion CEO for UK-based Standard Chartered, and the group acknowledges that the GMS countries have taken on a more important role in attracting flows of investment and trade to Asean.
With its long-established experience in Southeast Asia, StanChart has a good understanding of the investment activities in this region and believes it offers attractive funding options that match clients’ requirements even though it does not have branches in Myanmar or Cambodia.
Kok noted that Thai companies with exposure in the GMS might not always be able to count on support from a Thai bank.
“If the customers want dollar funding, we can serve this currency supported by out franchises overseas. We do not need to raise dollars as some Thai banks do, which is our advantage. Even though we don’t have a branch in Myanmar, we can serve foreign investors who have exposure there through cooperation with local banks,” she said.
She raised the example of Thai corporate Berli Jucker, which recently acquired Metro, a cash-and-carry unit of a German retailer, in Vietnam – StanChart in Vietnam was able to support the deal.
StanChart has had a 120-year history in Thailand, and 110 years in Vietnam. In Cambodia and Laos, the bank has had exposure for 20 and 18 years respectively.
The group will upgrade its representative office in Cambodia to a branch next year, she said.
StanChart decided not to apply for a bank licence in Myanmar as it believes it can support project finance from outside, and it has worked with local banks in Myanmar to assist customers.
Previously, StanChart had a long history in Myanmar, of more than 150 years, but only reopened a representative office in Yangon last year.
Kok believes Thailand has an important role in mobilising funds for investors, and the Stock Exchange of Thailand is very active in encouraging companies in Cambodia, Laos, Myanmar and Vietnam to list here. Thailand is quite advanced and it has a more complete infrastructure than those CLMV countries’, she said.
SCBT is the hub among the five Asean countries in the GMS (the Chinese province of Yunnan is also part of the sub-region) as the StanChart group considers that Thailand can help develop financial transactions involving the CLMV countries, especially in Myanmar.
Vietnam and Cambodia are also potential markets for StanChart as both countries are improving their economic fundamentals and opening up for foreign investment, she said.
With its geographic advantage and availability of short air hops, Thailand is a convenient hub for international companies to set up regional offices from which to open branches elsewhere in the GMS.
At the first stage, StanChart will focus on wholesale banking to serve international companies’ activities before expanding to local businesses and retail customers.
“We cannot build teams to serve all clients in a short time. All customer segments need the long process as we did in Thailand and Vietnam,” Kok said.