Thailand's third-largest bank by assets, Siam Commercial Bank, has formed a strategic partnership with Mizuho Bank, one of Japan's mega-banks, to strengthen SCB's overseas business.
Establishing networks overseas by setting up branches is an old-fashioned concept for the banking industry nowadays. SCB has therefore chosen this new path into international markets, by partnering with a giant foreign institution, said bank president Kannikar Chalitaporn.
SCB can support Thai companies that plan to invest in Japan and elsewhere through the Mizuho network. At the same time, Mizuho can refer its customers who plan to invest in Thailand to SCB.
"Mizuho has told us that Japan’s manufacturing base in Thailand is just as important as the base in Japan itself. SMEs in the supply chains for automotive and electronics are moving into Thailand," she said.
"Mizuho has only branch in Thailand, which is not sufficient to service the coming influx of Japanese companies. It wants a Thai bank with the capability of offering a full range of services, from accommodating employees on the payroll of Japanese companies to offering financial advisory to its [Mizuho’s] clients."
Japanese interests account for half of the total foreign direct investment in Thailand. SCB has seen an inflow of Japanese investors, mostly small and medium-sized enterprises serving upstream industries.
SCB this year set up a special unit to oversee Japanese customers.
Mizuho’s customer base in Thailand includes around 3,000 companies, 70 per cent of which are listed. At present, SCB serves 600 Japanese customers, and under the strategic partnership, it plans to double that number next year.
The income from overseas activities at SCB is small but in the medium term, income from international markets should grow significantly under the strategic-partnership model, it believes.
Kannikar said Thai companies in renewable energy and manufacturing were looking at investing in Japan as well. Mizuho has a strong network in many countries in Southeast Asia, especially Indonesia, and was recently awarded a banking licence in Myanmar.
Kannikar said SCB had no plan to open a branch in Indonesia, as it acknowledges that it cannot compete with local banks there. However, the Mizuho network can help SCB customers who have business interests in that country.
SCB is still interested in having a presence in Myanmar if the authorities there offer more licences in the future.
Nobuhide Hayashi, president and chief executive officer of Mizuho, said in a statement that Thailand was a key strategic location for core manufacturing and group sales companies in the Greater Mekong Subregion, where the formation of supply chains that span national borders is rapidly progressing.
"The strategic importance of Thailand in the Asia region’s economy is continuing to increase, and we have strong expectations of the central role it will play in the Asean Economic Community, which is scheduled to be established in 2015, especially due to its strong convenience in terms of land transportation among surrounding nations," the Mizuho statement said.