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Published on February 11, 2008

Thailand's largest bank currently has four branches in China - in Shanghai, Shantou, Xiamen and Beijing - and has been operating for 20 years. BBL is the only Thai bank enjoying success in China, though several local banks have attempted to penetrate the giant country, including Siam Commercial Bank and Kasikornbank (KBank).

Under the local banking licence requirements, the bank proposed a three-year business deal to the Chinese government, which will take around six months to consider the proposal. Prasong said if the bank were granted the licence, it could do banking business similar to local banks in China. BBL plans to open three to five full branches in the country over the next three years as well as to start providing retail banking services to local Chinese.

Foreign banks receiving a local banking licence in China are allowed to open two full branches per year, while they can open an unlimited number of sub-branches.

Although the Chinese government allows the bank to do consumer finance right now, the contribution of returns from its current four branches would not be worth the investment, Prasong said.

Its four branches in China offer five main financial services to Thai and overseas investors, mainly to corporate customers. These are deposit accounts, funds transfer, foreign exchange, trade financing, US dollar-based loans and letters of guarantee.

"If we have enough outlets to match with the bank's economy of scale, the bank can offer retail banking services to Chinese people who are employees of the bank's corporate customers. The consumer finance service offering would start in basic products, such as payroll services, deposit accounts and consumer loans," Prasong said.

Moreover, the bank would use local business partners as the key channels to expand the retail banking business in China. The bank could invest in local companies, utilising their customer base, as it does with its 10-per-cent stake in Peoples Insurance of China Corporate Life.

Prasong said the bank would use around US$2 million (Bt65.8) for each outlet expansion for the first year, and after that $1 million per branch. Normally, it needs only one year to meet the break-even point of a branch in China, supported by higher demand and business volume in the huge country.

In addition, Prasong said the bank aimed to increase overseas loans by 26 per cent this year, equal to last year's growth rate. Its foreign assets proportion is expected to increase to 17-18 per cent of the bank's total assets by the end of this year from around 14-15 per cent currently.

Beside China, the bank has 18 other offshore branches, in Hong Kong, Indonesia, Laos, the Philippines, Singapore, Taiwan, Vietnam, Malaysia, the UK and the US.

KBank CEO Banthoon Lamsam earlier said his bank required Chinese business partners to support the bank's business operation in the country. Thailand's fourth-largest bank plans to start banking business in China with loans to small and medium-sized enterprises.

He said SME loans were likely to be the only business the bank could do in China. Chinese SMEs lack funding, while Chinese banks do not pay attention to smaller customers.

KBank earlier received a licence from the Chinese government for banking business in the local currency in Shenzhen.

Somruedi Banchongduang

The Nation