Geopolitical woes 'could hold back Thai economic growth'

business August 18, 2014 01:00

By Sucheera Pinijparakaarn
The N

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External factors, including geopolitical conflicts, are posing a challenge to Thailand's economic rebound even though the country appears headed for normalised growth, according to the co-presidents of Kasikornbank, Predee Daochai and Teeranun Srihong.

The economic picture has brightened thanks to the policies of the National Council for Peace and Order, Predee said. However, both men acknowledged that the Thai economy could be shaken by geopolitical problems abroad; such conflicts have been outstripping internal factors as the top concerns of business.

The global economic recovery is still fragile, and these geopolitical factors are not helping, Teeranun said. Therefore, KBank will not be making many aggressive moves for now, and its loan-growth target remains in single digits, at 8 per cent this year and 9 per cent in 2015.

The country’s fourth-largest bank by assets reported Bt23 billion net profit for the first half of this year, higher than expected by the bank presidents, despite the instability plaguing the country in the period and lending growth that was behind the target.

KBank reported loan growth of 2.3 per cent for the first half of 2014. Predee said that in the current half, the bank is preparing to support customers who require credit for business expansion to cash in on the expected rebound in the Thai economy and full implementation of public investment.

Eyeing the region

Teeranun said he expected the construction, building-materials, logistics and agricultural-industry sectors to be among the first to seek the bank’s support.

Besides local activities, KBank is closely tracking the movement of Thai companies that are broadening their business bases in Asean. This has encouraged the bank to adjust its franchise model.

In Laos, KBank is setting up a wholly owned subsidiary to be a local bank instead of opening a branch. Besides opening up the opportunity for further expansion in the neighbouring country, this would give it more operational flexibility. For example, Teeranun noted, the bank would be able to set up more automated teller machines, unlike a branch, which can operate ATMs in front of the outlet only.

KBank’s subsidiary in Laos will be officially formed early next quarter, Predee said.

Teeranun added that the subsidiary in Laos would focus on wealthy customers and provide loans to local businesses, including Thai enterprises with activities in that country.

KBank plans to set up representative offices in Vietnam, Cambodia and Indonesia this year, developing relationships with local banks before applying to establish branches as the next step, he said.

In Vietnam, KBank plans to have two branches, one in the north and one in the south.

Predee said it was not too late for the bank to prepare for the arrival of the Asean Economic Community next year even though it would still have only representative offices in some countries in the region. Teeranun added that in the Thai market, some areas of the bank’s activities were maturing, so it must go outside the country to look for new opportunities.