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Business trends

Siam Commercial to shut 750 branches by 2020 but no layoffs

Lender to halve banking staff as it goes digital and focuses on consumer loans

Siam Commercial Bank Chief Executive Arthid Nanthawithaya said that a new focus on consumer loans is part of the bank's three-year vision. (Photo by Yukako Ono)

BANGKOK -- Siam Commercial Bank, the country's third largest bank by assets, plans to close nearly two-thirds of its branches and halve its commercial banking workforce to 1,500 by 2020 as it adopts more digital technologies such as mobile banking and artificial intelligence.

It plans to leave open just 400 branches which will be staffed by around five, down from the current 10 per branch. But the bank said that it does not plan to lay off any staff and instead will offer those made redundant by the changes positions in investment advisory and private wealth. 

These sweeping changes will help cut costs related to customer services by 30%, Chief Executive Arthid Nanthawithaya told reporters in Bangkok on Monday.

Thailand has one of the fastest-aging societies in Southeast Asia and this is starting to bite the local economy. The banking industry, which has conventionally relied on its wide network of branches and a huge workforce to court customers, has to find ways to increase efficiencies especially in human labor.

Siam Commercial Bank has 1,153 branches as of December. This is 1.5 times higher than the 766 domestic branches operated by Japan's megabank Bank of Tokyo Mitsubishi UFJ despite its population of 127 million dwarfing Thailand's 69 million.

Arthid said the bank will not lay off anyone but will stop hiring counter staff to process documents because much of that work can be taken up by robots and other digital technologies. Arthid projects natural attrition of around 3,000 employees every year.

The bank will offer training to existing counter staff and move them to advisory operations such as in wealth management or supporting small- and medium-sized enterprises. "Our staff will be relationship managers ... who could add value and enhance capabilities of their customers," Arthid said. Some of the branches to be shut down are set to be converted into centers offering business support and investment advisory.

Other Thai banks are also downsizing as mobile banking spreads, thanks to high smartphone penetration in the country. The total number of bank branches in Thailand, as of year-end, peaked in 2015 at 7,061 and has declined for two straight years, according to statistics from the Bank of Thailand. As of December 2017, there were 6,786 branches, down 3% on the year.

The rise of digital technology is pushing Siam Commercial Bank to other reforms too. Unveiling the bank's management vision through 2020, Arthid said the bank will expand into the unsecured loan sector, or riskier loans with higher margins such as consumer loans and credit card loans.

Like other big banks in the country, Siam Ccommercial Bank had been more focused on lending to corporates in the recent past. But Arthid said that as competition for corporate loans intensifies and loan growth slows, the bank needs to take on new challenges. In 2017, the combined loan growth of the country's four big banks was a mere 4%. By contrast, Siam Commercial Bank's lending increased 5%.

"High-margin lending may sound as if we are becoming shark loans but it actually means that we want to support the new generation entrepreneurs," said Arthid. The bank will screen clients by using data analyzing technology it has developed to assess default risks. 

Siam Commercial Bank's net profit for 2017 came in at 43.151 billion baht, down 9.7% on the year. This was partly due to higher impairment losses as a result of a major default by a mining company.

Last October, Thailand's King Vajiralongkorn Bodindradebayavarangkun personally become a major shareholder of the bank with a 3.3% stake after part of the shares held by the Crown Property Bureau, the bank's top shareholder, were transferred to him. Arthid said Monday that nothing at the bank has changed after the transfer.

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