BANGKOK -- Kasikornbank, one of Thailand's four largest banks, is expanding its branch network in member countries of the Association of Southeast Asian Nations, hoping to capitalize on increasing cross-border business activities by Thai and Japanese companies following the establishment of the ASEAN Economic Community (AEC) at the end of last year.
In particular, the bank is stepping up its market expansion into less developed countries in the Mekong River Basin, which includes Thailand, hoping to catch up with Singaporean and Malaysian banks that have established leading positions in ASEAN.
Kasikornbank's branch in Mae Sot in the northwestern Thailand province of Tak, which shares a border with Myanmar, is flooded with Thai and Myanmarese merchants every evening as they bring daily sales proceeds there. Bill counters at special lanes for "VIP" customers who bring 2 million baht ($56,680) or more operate at full capacity towards the end of each business day.
One such customer is a Chalermwat Treeratwatta, 35-year-old Thai, who opened a sales agency for agricultural machinery in Myanmar two years ago. He said the branch is helpful because he can readily ask for advice on a variety of issues such as tax payments, foreign exchange rates and loans. Employees at his Myanmar branch bring millions of baht, in cash, to the branch every day.
Banking services related to cross-border trade are becoming a major operation for Kasikornbank at a time when the Thai economy remains in the doldrums, said Kittichart Potithat, head of world business strategy management.
The bank upgraded the Mae Sot branch to its first Border Trade Business Center in November last year to boost support for investment in Myanmar. Loans provided through the branch increased 12% in value in 2015.
While the AEC is activating trade among ASEAN states, Thailand has a geographical advantage as it is located at the center of the region, said Banthoon Lamsam, CEO at Kasikornbank.
An increase in trade settlements in baht is a boon for the bank. While baht-denominated settlements account for 20% of Thailand's exports to all other ASEAN members, the ratio tops 50% for exports to four nations along the Mekong River -- Cambodia, Laos, Myanmar and Vietnam.
Kasikornbank was founded in 1945 by Choti Lamsam, a local Chinese and Banthoon's grandfather. The Lamsam family, which has an equity stake of around 5% in the bank, also launched major life insurer Muang Thai Life Assurance and Loxley, the biggest trading house in the country.
Kasikorn means "farmer" in Thai. Despite its name, farmers have never been their core customers. "It's a misunderstanding," explains CEO Lamsam. "We are a commercial banks and not an agricultural bank."
As the biggest provider of loans to small and midsize businesses, Kasikornbank had assets totaling 2.136 trillion baht at the end of 2015, the fourth-largest among Thai banks. It logged a net profit of 39.4 billion baht in the business year ended in December, down 14% from the previous year, due in part to the country's economic slump.
The bank opened a branch in Laos last year. In Cambodia, it started a service jointly with a local company, enabling Cambodian workers in Thailand to make remittances to their home country via mobile phone.
Thai banks were damaged so hard by the Asian currency crisis of 1997 that they have been slow to expand overseas operations, compared with other banks in the region. While major Singaporean and Malaysian banks have hundreds of branches overseas, Bangkok Bank, the second-biggest bank in Thailand in terms of assets, operates the most extensive overseas network, with 32 branches, among Thai banks. Kasikornbank has only seven outlets outside Thailand.
Thai banks are witnessing the emergence of opportunities to go abroad due to an increase in local companies' corporate mergers and acquisitions in the region and growing demand for funds among Japanese companies to invest from Thailand in its neighboring countries.
Kasikornbank often does business with small and midsize Japanese companies based on its tie-ups with 29 regional banks in Japan. In January, it relocated and expanded its representative office in Tokyo to cope with an increase in smaller Japanese companies entering Thailand's neighboring countries, according to Lamsam.
Increasing opportunities, however, means that Kasikornbank is exposed to intense competition with other Thai banks. In Myanmar, the bank was left behind by Bangkok Bank as it was excluded from the local government's first round of issuing licenses to foreign lenders.
In addition, Bank of Ayudhya, the fifth-largest Thai bank, acquired by Japan's Mitsubishi UFJ Financial Group in 2013, said Wednesday that it will acquire Hattha Kaksekar, a Cambodian financial institution, to launch microfinance services in the country.
To survive increasing competition in Southeast Asian, Kasikornbank needs to thoroughly promote operations based on expeditious strategies including M&As.