Lenders clamour for Japanese customers

Duangdao: Growth across all segments

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Competition among commercial lenders to grab Japan-linked business customers is heating with Bank of Ayudhya taking advantage of low funding costs from its parent to adopt an aggressive approach to the segment.

With its goal to become a top-tier bank by 2018 and its strategy to focus more on Japanese customers, the country's fifth-largest lender by assets has aggressively expanded its targeted customer base, a source in the banking circle said.

Given the lower funding costs provided by its parent Bank of Tokyo Mitsubishi UFJ on the back of the Bank of Japan's negative interest rate regime, BAY can offer lower interest rates than its industry peers to corporate customers and steal Japanese customers from large players, the source said.

Bangkok Bank (BBL), the country's largest lender by assets, with the highest Japanese business exposure, is likely to feel the biggest pinch among lenders from the intense competition in terms of both interest income and customer base.

Even though some Japanese customers have departed, BBL expects to maintain its major base of existing clients as it is normal practice for customers to use more than one bank's services under risk diversification, the source said.

Kasikornbank executive vice-present Patchara Samalapa said the bank has also decided to let some of its Japanese clients use other banks to maintain its positive margin.

However, customers who leave the bank are likely to come back as normal business practice, he said.

Typically, Japanese companies and their related businesses in Thailand, particularly in the automobile and electronic sectors, take out corporate loans from local banks for their business expansion, he said.

BAY's total loan growth for the first eight months of this year rose 5% from the end of last year. The bank has set a loan growth target of 5-6% this year.

Chief financial officer Duangdao Wongpanitkrit recently said the positive loan expansion could be seen across business segments including corporate, small and medium-sized enterprises and retail. Mortgages and car hire-purchase loans are the key contributors to the strong loan growth.

With positive loan demand, deposits rose by 3.6% for the first eight months of the year as well.

"The recovering economy will be favourable for the bank's lending activity and performance, so we expect to record continued growth in the third quarter," she said.

The bank has issued a 10-billion-baht tier-two subordinated debenture which will further strengthen its capital position and provide more flexibility for business expansion.

BAY shares closed yesterday on the Stock Exchange of Thailand at 37.25 baht, up one baht, in trade worth 33.7 million baht.