Thai banks set for expansion amid ASEAN economies’ growth

A surge in regional business expansion is forecasted for major local banks in Thailand due to the growth potential of ASEAN economies. This outlook has been provided by Fitch Ratings Thailand, indicating promising revenue prospects for these banks through increased regional operations.

In 2023, a noticeable upturn in the regional business of large local banks was observed, primarily due to several cross-border acquisitions. This led to significant overseas loan growth from 2020 to 2022.

The international loan portfolio of domestic systemically important banks (D-SIBs) escalated to 10% of total outstanding loans, a rise from 6% in 2020, according to Jindarat Sirisithichote, associate director for financial institutions at Fitch Ratings Thailand.

There are six D-SIBs in Thailand: Bangkok Bank (BBL), Kasikornbank (KBank), Krungthai Bank (KTB), Siam Commercial Bank (SCB), Bank of Ayudhya (Krungsri) and TMBThanachart Bank. Among these, BBL, KBank, SCB, and Krungsri have notably increased their operations in neighbouring countries.

However, the foreign operations of local banks still constitute less than 1% of each bank’s total assets, except BBL, which has double-digit figures due to its extensive experience in this sector.

Jindarat Sirisithichote noted that with the strong growth in Southeast Asian economies, particularly in Vietnam, Indonesia, and the Philippines, Thai banks have substantial opportunities for regional expansion. Fitch expects Thai banks to steadily grow internationally by establishing branches and seeking acquisitions. This approach will aid banks in diversifying their revenue streams and applying their locally acquired expertise to similar overseas markets.

Announced in February, SCB’s agreement to acquire a 100% share of consumer finance lender Home Credit Vietnam is an example of this strategic international growth. The acquisition is expected to be finalised in the first half of 2025, and will likely support SCB’s international banking business in the long term.

Economic growth

Revenue growth for KBank’s international banking business is projected at around 20% for 2024, following a 25% uptick the previous year. Krungsri aims to increase its revenue from this segment to 25% in three years, a significant rise from 14% in 2023. BBL, the country’s largest lender by total assets and a leading player in the international banking business, plans to sustain the segment at about 25% of the total loan portfolio in the coming years.

According to Jindarat Sirisithichote, the growth in regional business opportunities has encouraged the Thai corporate sector to expand offshore. Over the past decade, overseas direct investment has seen a remarkable 223% increase, providing a ready customer base for Thai banks entering international markets, reported Bangkok Post.

However, Thai banks will likely face increased competition from global counterparts, who are also keen on expanding their footprint in the region.