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KTB expects more business in Kunming after kicking off yuan transactions next year

Kittiya

Kittiya

State-owned Krungthai Bank expects to expand lending at its branch in Kunming, capital of China's Yunnan province, by more than 10 per cent in 2014, up from 5-7 per cent in previous years, by conducting transactions in yuan and selling banknotes in baht.

KTB is the only foreign bank in Kunming, where it established a presence in 1996 to finance trade and investment by Thai corporations through US dollar-denominated loans. The branch's registered capital is US$12.5 million (Bt400 million).

The bank expects to receive a yuan licence from the Chinese central bank this month and will begin yuan transactions next year.

The licence will allow the bank to expand its customer base to local small and medium-sized enterprises.

Kittiya Todhanakasem, first senior executive vice president, said Thai customers accounted for 90 per cent of its credit portfolio and Chinese customers 10 per cent.

Business at the Kunming branch is expected to increase in line with the rapid growth of the economy. The branch aims to strengthen its relationships with local banks and capture more Chinese companies doing business with Thai firms, she said.

The branch's non-lending services have been limited. It could only take US dollar deposits, make interbank placements and facilitate fund transfers, so it was growing at only 5-7 per cent annually.

When China opens its economy, trade and investment flows will increase. This will present opportunities for Thai companies to do business here. The Greater Mekong Subregion (GMS) is a focus of KTB, so the yuan license and the investment flows will help spur double-digit lending growth at the branch. Yunnan is a member of the GMS.

KTB's target in China and Asean is the offshore activities of large corporations. Kunming has been promoted by the Chinese government as the centre of logistics with Asean. KTB will actively seek to give advice to Thai companies, especially SMEs that are interested in penetrating Kunming.

KTB had not tapped the SME market because Thai companies doing business in Kunming were large corporations and trading houses.

Recently, the Kunming branch upgraded its information-technology system and moved to a new office to prepare for yuan transactions.

"Kunming has demanded yuan for making transactions. The licence will enable KTB to deal in swaps, banknotes and derivative products, especially for cross-border transactions," Kittiya said.

The business plan for the Kunming branch will be revealed early next year.

KTB will soon sign an agreement for a local bank to start distributing baht bills through its branches next quarter.

KTB has eight branches and one representative office to support its positioning as the bank for niche markets, focusing on the GMS.

"We can use the network of correspondent banks in 118 countries to serve customers," she said.

In China and Asean, KTB has 256 correspondent banks.


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