KBank in move towards a local Chinese bank

Economy May 28, 2013 00:00

By Achara Deboonme
The Nation

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Kasikornbank chairman Banthoon Lamsam is famous for his impatience towards slowness. But sitting on a couch in the newly opened branch in Chengdu near Tianfu Square, where stands a statue of modern China's founder Mao Zedong, he apparently gave in to tar



As the bank opened its second branch in China last week, he announced the plan to obtain licences for more branches, to achieve the ultimate goal of becoming a truly local bank even though that could take years. Such patience should yield a fruitful result, given China’s prominent status in the global economic arena, when the Asean Economic Community starts.
“China is a challenging market for KBank,” he told a news conference. “We’re leading companies in both countries [China and Thailand] to another step under the China-Thailand-AEC context.”
 
 
It took KBank two years to obtain the licence for its Shenzhen branch and a similar period for the licence for the Chengdu branch in Sichuan province, which was opened three years after Shenzhen. According to Pipit Aneaknithi, head of Kbank’s China business division, 10 more cities are shortlisted for new branches including Jiangsu, Wuhan, Xian, Fujian and Nanning. 
Banthoon said KBank would thrive in the south of China, as the eastern part of the country has been the location of global banks. Cities with direct flights from Bangkok are preferred, to boost bilateral trade. “We need to be where we can prosper.”
He patiently plotted and implemented the expansion plan. In the aftermath of the 1997 financial crisis, KBank shut down representative offices in China. After cleaning up the mess at home, it revisited the China market. Banthoon himself has visited the country on a regular basis for 10 years to establish connections with local authorities and businesspeople. 
The pace quickened in 2004 when KBank was approached by China Minsheng Banking Corporation (CMBC) for cooperation. They studied and developed a financial-service platform and provided loans to small and medium-sized enterprises in China with a risk-management technique that has provided sound financial management for such businesses. “Ten years ago, we had no idea what to do here. We knew nobody. We’re here today with help from God. In China, without friends, it’s hard to survive. Good friends will show us the way,” he said.
He believes it is important to impress Chinese authorities with commitment. After three years, the Shenzhen branch’s outstanding loans have grown to 1.5 billion yuan (Bt7.3 billion). In 2012, the branch generated 25 million yuan in net profit. Banthoon is convinced that the Shenzhen branch’s impressive performance had led to the licence for the Chengdu branch, and the latter’s success will then pave the way for more branch licences in due time. It will open a sub-branch in Longgang, Canton, in the third quarter of this year, and upgrade it to a Locally Incorporated Institution (LII).
 
Donation to earthquake victims 
On the branch’s opening day, KBank presented a 500,000-yuan donation to earthquake victims in Chengdu, as a gesture of commitment. The Chengdu branch is expected to lend 180 million yuan this year. Total lending in China this year is targeted at 3 billion yuan, aside from 4 billion of trade finance transactions through its Shenzhen Branch.
In Chengdu, KBank is the 14th foreign bank to obtain a branch licence. According to Komate Kamalanavin, Thai consul-general in Chengdu, the city is benefiting from its proximity to Chongqing – one of four province-level cities aside from Beijing, Shanghai and Tianjin.
To date, KBank is the only Thai bank to establish firm roots in China aside from Bangkok Bank, which has obtained local-bank status. Unlike BBL, which targets big corporations, KBank limits its exposure to small and medium enterprises (SMEs) – companies with assets below 300 million yuan and employing no more than 1,000 people. Like those in Thailand, SMEs in China have limited access to funding, Banthoon said.
The expansion would not go as quickly without planning. In the early 2000s, KBank executives, including Pipit, were given Mandarin language training. As five of its 10 overseas units are in mainland China, the language course continues. All departments at the headquarters stand ready to help. Aside from only 12 staff manning the Chengdu branch, the supporting team involves more than 100 from the headquarters in Bangkok. 
Banthoon acknowledged that Mandarin-language resources were a must to expedite the dream, and this was difficult, as most executives want to pursue opportunities in Thailand rather than in China. He also acknowledged that the banking regulatory environment in China was challenging, with strict controls and frequent changes.