Bangkok Bank: Banking

The Company

Established in 1944, Bangkok Bank is the largest commercial bank in Thailand and one of the largest regional banks in South-east Asia. With total assets of approximately $64bn, it has the largest market asset share among Thai banks (18% of total system), as well as the largest share of both loans (17%) and deposits (18%), as of September 2013. Bangkok Bank is Thailand’s market leader in corporate and SME banking and has the country’s largest retail customer base. It has 17m accounts including business and retail customers, over 230 business centres and business desks, and a nationwide network of 1100-plus branches.

Bangkok Bank has the largest overseas branch network of any Thai bank and it is the only Thai bank with a substantial presence in China. The bank’s foreign branch network spans 13 countries. Meanwhile, its overseas loan portfolio represented 15-19% of its total in the past five years, the highest among Thai banks vs. less than 2% for other large Thai banks.

Over the past five years, the bank posted a sound earnings per share (EPS) combined annual growth rate (CAGR) of 13%, with growth of 11-19% during 2009-13. The bank’s financial positions have continued to strengthen in all aspects, i.e., the non-performing loan (NPL) ratio declined to 2.2% in 2013 from 4.4% in 2009, while the reserve-to-NPL ratio improved to 214% from 117%. In addition, its total capital ratio strengthened to 16.8% from 15.5%. In terms of profitability, its return on equity improved to 13% from 11%, although it remained weaker than the sector average of 12-15% for the same period. This should be partly due to the bank’s main loan mix, with a high concentration of corporate loans (around 45% of loans) that offer a lower yield vs. SME (25-27% of loans) and retail loans (12% of loans). Moreover, the bank’s conservative policies, especially its low balance sheet leverage (maintaining a high liquidity position) and weaker retail banking platform vs. direct peers, are another possible reason.

Development Strategy

The bank’s ongoing market leadership is due to its philosophy of developing long-term supportive partnerships with its customers.

Bangkok Bank's key competitive strengths continue to be the size of its customer base – which is the largest in Thailand – its enduring customer relationships and an unrivalled regional branch network.

In the years to come, the bank is expected to build on these strengths, while at the same time working to improve the efficiency of its operations and risk management, and the quality of its customer service. Domestically, the bank has plans to leverage synergies between its strategic business units and subsidiaries to further strengthen its fee income base.

The bank also intends to expand its regional presence and international services. We expect it to be in the best position among Thai banks to capture opportunities overseas, especially from the launch of the ASEAN Economic Community (AEC) in 2015-16, owing to the bank’s advantages of having the largest foreign branch network, the largest overseas loan exposure among Thai banks and long-standing expertise in the business, especially in China.

Specifically in terms of the lending business, apart from maintaining its leading position in corporate and mid-sized to large SME lending, the bank aims to put more effort and focus toward improving its retail banking base, which is currently weaker than its direct peers.

However, we have seen an improving trend from this effort with regard to fee income enhancement in the past couple of years and expect stronger growth momentum over the longer term. We expect Bangkok Bank to post EPS CAGR of 10% in the next three years, which should be supported mainly by the lending business (especially corporate and SME lending) and growth in non-interest income (particularly through better cross-selling within the group, especially in the insurance and asset management businesses).

Moreover, we anticipate that Bangkok Bank will be in a better position to manage potential economic and political headwinds, thanks to the bank’s healthy financial position and prudent risk management practices.