KTB Leasing in joint venture talks with Laotian bank
December 10, 2013 00:00
By Sucheera Pinijparakarn
Operations to begin in second quarter of 2014, serving corporate customers
KTB Leasing, a subsidiary of Krungthai Bank, is in talks with a bank in Laos to set up a joint-venture company that would enable it to do corporate leasing in that country, said Weidt Nuchjalearn, first senior executive vice president of KTB and chairman of KTB Leasing.
Once negotiations are successfully concluded, the joint-venture company could begin operations in the second quarter of next year.
He said investment in the JV was not expected to be much, as the leasing market in Laos was currently valued at only US$98 million (Bt3.15 billion) – small compared with corporate leasing in Thailand.
Thai companies have continued to expand their operations in Laos as the country’s growing economy attracts an increasing number of foreign investors ahead of the Asean Economic Community (AEC), which commences in a couple of years.
Increasing foreign investment in Laos has resulted in a growing demand for machinery, commercial equipment and vehicles – key components of KTB Leasing’s business, Weidt said.
The bank’s first goal in Laos will be to provide leasing financing to corporations that require machinery for dam construction, logistics and forestry development. KTB Leasing will provide the leasing know-how, while local partners with access to large distribution networks oversee the company’s distribution channels, he said.
With a portfolio of Bt30 billion, KTB Leasing is ranked among the top five leasing companies in Asean. The company hopes its expanding business portfolio in Laos will put it among the top three within the next three years, and boost its portfolio to between Bt50 billion and Bt80 billion.
The bank has already opened a branch in the Laotian capital, Vientiane, and plans to open more branches in the country over the next few years. At a recent meeting with the Laotian government, it was agreed that the bank would set up a new branch in one of four provinces: Savannakhet, Champasak, Luang Prabang or Bokeo.
Because Laos is still a developing market, Weidt said poor infrastructure and the long distance between provincial cities meant that a second branch was necessary to facilitate smooth business transactions.
Other Thai companies have followed a similar strategy in Laos so that their customers outside Vientiane could take advantage of their services. Thai-based Thanathon Orchard, for example, has expanded its orchards in Thailand’s Chiang Mai province to cover Pak Song province in southern Laos, he said.
Kittiya Todhanakasem, first senior executive vice president of KTB, added that the bank had also requested a license from the central bank of Vietnam to open a branch in that country. However, the central bank had said it wanted to focus on bringing down the high rate of non-performing loans within its banking industry before opening up to foreign investors.
“The central bank suggested that if we wanted to open a branch in Vietnam, a joint banking venture would be the best solution. However, we do not want to rush into any deal, as KTB wants to consolidate its presence in the Greater Mekong Subregion,” Kittiya said.