Looks to regional role with presence in all 10 Asean states
Krungthai Bank will have to acquire foreign banks if it wants to achieve its goal quickly of becoming a regional bank with a larger network in all 10 Asean countries, president Vorapak Tanyawong said.
It currently has branches and a representative office in only four countries – Cambodia, Singapore, Laos and Myanmar.
Expansion through branches is too slow to provide financial services in all 10 countries, so KTB needs to think about inorganic growth through mergers and acquisitions, Vorapak said in an exclusive interview with Nation Group.
The banker has more than 20 years of experience particularly in capital raising, risk management and investment banking.
KTB needs to think medium to long term to become a regional bank because lower prices of assets that it wants to buy might be seen when the crisis comes. The bank must prepare itself in terms of strong capital, which is not a serious problem because being a state-owned bank, it can count on support for its plan from its major shareholder, he said.
Global financial-service adviser Accenture recently recommended Thai banks to change their strategy of being takeover targets for banks from Singapore and Malaysia or other countries to searching for opportunities to take over banks in the region.
Thailand has a geographic advantage by sharing borders with several countries in the region, so its banks are in a good position to finance increasing trade and investment flows within Asean, it said.
Vorapak said the challenge was how to make KTB’s balance sheet efficient while still enjoying high profitability, so loan growth is not the priority target for the bank.
Fee-based income will play an important role in profitability. The bank will drive fee-income growth of up to 20 per cent a year against loan growth of no more than 10 per cent.
Non-interest income will increase to 30 per cent of the bottom line from 20 per cent and interest income will decline to 70 per cent from 80 per cent, according to the target.
Bank loans generally expand at 1.5 times growth of gross domestic product. KTB is no exception. However, its loan portfolio will be driven mainly by small and medium-sized enterprises rather than corporate or state customers, he said.
The plan is for the composition of the bank’s loan portfolio to change within two years. SME loans will increase to 30 per cent from 20 per cent, corporate loans will decline to 30 per cent from 40 per cent, and retail and state loans will remain unchanged at 30 per cent and 10 per cent.
KTB is aggressively focusing on SME customers, especially those with a credit line of Bt300 million to Bt500 million. Compared with government loans, SME loans give better margins and cross-selling opportunities, it says.
SMEs are always popping up, while the number of big corporations has not changed in 10 years.
Venture capital is the right way to cultivate a new crop of SMEs, he said. The reduction in Thailand’s corporate tax will promote grey SMEs into qualified enterprises.
For corporate customers, KTB will strengthen its role as a capital arranger rather than a credit provider because the sustainable growth of corporations is not helped by loans. The bank must offer them solutions, products and services such as cash management and foreign-exchange risk management so that they can operate more efficiently, Vorapak said.