April 12, 2014 00:00 By Sucheera Pinijparakarn
As a subsidiary of Japanese giant, there will be heavy focus on business lending, says CEO
Noriaki Goto, chief executive officer of Bank of Ayudhya, has set turning the institution into a large bank as a medium-term target while retaining double-digit return on equity (ROE).
The country’s fifth-largest bank by assets is considered medium-sized, but now that it has become a subsidiary of the Bank of Tokyo-Mitsubishi UFJ (BTMU), a wholly owned subsidiary of MUFG, Japan’s largest financial group, Krungsri will have to be seen in the first tier of major banks, he said.
Goto told reporters that even though he does not have a precise forecast for ROE, it should be in the range of 15 per cent. Krungsri last year reported ROE of 10 per cent.
BTMU has a long-term commitment to its investment in Thailand despite the political uncertainty, he said.
To keep its business sound for the long term, its executives are making medium-term plans because the bank will have a new platform based on a combination of corporate clients – a strong customer base of BTMU’s Bangkok branch – and the retail customers of Krungsri.
“BTMU has a strong background in project finance and corporate banking, while Krungsri has expertise in consumer finance. Therefore, the challenge is how to make Krungsri serve all financial requirements of all kinds of customers,” he said.
After the merger, business lending will be the major portfolio at 60 per cent, and the proportion of retail loans will drop to 40 per cent from more than 50 per cent.
He said Krungsri would remain a retail lender because it is the market leader in consumer finance. Even though the retail-loan proportion will be 40 per cent, the mix should be balanced to keep the bank competitive.
Krungsri is expanding its footprint in Asean by using BTMU’s strong franchises overseas, including in the Greater Mekong Subregion. However, it is not known yet whether this expansion will be in the form of new banks, subsidiaries or joint ventures.
Goto cited the example of the business-integration platform in the United States between BTMU and Union Bank, where the latter oversees retail banking while BTMU is in charge of corporate banking, fully leveraging services to customers. When both financial institutions were combined, Union Bank was renamed MUFG Union Bank.
“Here in Thailand, BTMU is building a new platform in Asean, and this will be a new experience for MUFG. BTMU is No 1 in project finance, and hopes to participate in infrastructure projects in Thailand and Asean,” he said.
In the domestic market, faced with political uncertainty that is dragging down the economy, Goto said Krungsri had to accept that its loan-growth target of 9 per cent could drop by 2 percentage points if the situation hits the bank’s performance.
He noted that enterprises of all sizes would be the main contributors of loan growth to the bank this year but net interest margin could go down from last year’s 4.2 per cent. Still, he is optimistic that NIM will not go below 4 per cent.