British-owned bank on road back to health

October 30, 1999 -- STANDARD Chartered Nakornthon Bank is expected to return to profitability over the next three to four years, reflecting the potential for the foreign-owned local bank to bounce back in the medium term.

Chief executive officer of Standard Chartered Group Rana Talwar said yesterday the UK bank's willingness to acquire the former Nakornthon Bank and work through the losses over the next two years demonstrates its commitment to investing in Thailand for the long term.

Standard Chartered Bank recently completed its Bt12.38-billion takeover of Nakornthon Bank and changed its name to Standard Chartered Nakornthon.

DBS Thai Danu Bank, majority-controlled by Development Bank of Singapore, is in a similar situation, with the crediting rating agency Fitch IBCA, expecting it will return to a reasonable level of profitability in 2001.

However, when Standard Chartered Nakornthon Bank can resume trading its stock in the stock market remains uncertain.

First, the Financial Institution Development Fund has to divest at least 10 per cent of its holding in the bank to public investors, and the FIDF said recently it will only divest after Standard Chartered Nakornthon Bank's operation has improved to an acceptable level.

Standard Chartered Group holds about 75 per cent in the local bank, compared to the 24 per cent the FIDF holds.

For the time being, Talwar said the bank will focus on human resources development and invest about Bt1 billion over the next year in new technology, systems and branch upgrading. The bank operates 67 domestic branches and employees 2,000 people. It has a customer base of more than 100,000.

Talwar said the bank will build consumer banking as its core business, which includes credit card, auto financing, mortgage lending and other retail financial services. The bank will also look for future growth in cash management, trade finance and services to small- and medium-scale companies, as well as tapping major Thai corporations and multinational companies, he added.

Talwar was on hand yesterday to welcome Gen Prem Tinsulanonda, president of the Privy Council, who presided over the formal inauguration of Standard Chartered Nakornthon Bank.

Standard Chartered has had a branch office in Bangkok for 105 years. Acquiring the Thai bank realises its long-standing ambition to undertake domestic banking.

A window into the Thai banking industry opened for Standard Chartered Group two years ago when Thailand suffered its financial crisis. But not until earlier this year did the prospect of Standard Chartered's acquisition of the Nakornthon Bank come into clearer shape. Last month Standard Chartered Bank formally took over the Thai bank, once controlled by the Wanglee family.

The acquisition of the Thai bank is part of Standard Chartered Group's larger foray into the Asian market, from where most of its earnings come.

The group, Talwar said, is interested in acquiring Bank Bali of Indonesia in spite of the scandal that has embroiled that bank. (The scandal involves questionable transfers of money worth about US$80 million meant as aid for the country but which found to find its way to a company controlled by a senior official linked to the former ruling party.) Standard Chartered now is helping Indonesian authorities run Bank Bali.

Talwar praised Thai authorities for their work in financial sector reform and corporate debt restructuring. He said some Thai banks are already back in healthy positions and can begin lending money for good projects. ''I believe that banking activity has begun to resume,'' he said, adding that export-oriented companies are most likely to get priority support from the banks.

Yet, a lot of work remains in restructuring the corporates, industries and real estate business to weed off the overcapacities. Talwar said it will take years before all the bad loans are written off the books of Thai banks.

BY THANONG KHANTHONG