Bangkok Bank’s acquisition of Permata Bank for US$2.7 billion is not only the largest acquisition in the bank’s 76-year history, it is also expected to bring about change. This transaction will transform Bangkok Bank from a large Thai bank with a good Asian network to a bank with strong influence in the two largest economies in Southeast Asia, laying the foundation for years of sustainable growth.
This is also a personal milestone for the 62-year-old Chartsiri Sophonpanich, chairman of the Bank of Bangkok, enabling him to consolidate the family’s legacy and reinforce the banking regional aspirations initiated by his grandfather Chin, who was in 1944 and its first president.
“Usually, we grow organically,” Chartsiri said in a rare interview during a video call in his office at the Silom Road Bank headquarters. “We are not growing through acquisitions.” However, Indonesia is one of the world’s largest and fastest growing economies, and its opportunities should not be missed.
At the time of the long-awaited Asian bank integration initiative, Thai commercial banks are seeking growth elsewhere amid internal headwinds that weaken their profitability.
Bangkok Bank announced in its first conditional offer in December 2019 that it completed the purchase of 89% of Permata Bank from Standard Chartered Bank and Astra International, the Indonesian subsidiary of Jardine Matheson, last May. It then raised this amount to 98.71b in a mandatory public offering in October. The Indonesian branches of the two banks were formally integrated in December last year.
PermataBank Building, located in Jakarta, Indonesia.
, PermataBank Building, Jakarta, Indonesia. Bangkok Bank provides
Permata Bank, which operates under the name PermataBank, has provided Bangkok Bank with approximately 4 million new customers, opened 300 branches across the country, and added approximately $13.8 billion to the bank’s asset base, with total assets of approximately 1,260 One hundred million U.S. dollars. In the first three months. Most importantly, it strengthens its position as a goto lender that supports customers’ ambitions in the region. “PermataBank is a strategic acquisition,“ Chartsiri said.
“The growth of the regional market is much stronger than that of Thailand. International [loans] account for more than 24% of our portfolio. We can expect this to support our continued growth.”
The third-generation head of Thailand’s largest asset bank artificially revitalized A bold move for growth. Under the leadership of Chartsiri’s father and grandfather, after developing at an extremely fast pace in the first few years, the bank has been struggling to cope with the development momentum of the local market in the face of slowing economic growth, high household debt and low interest rates.
The pandemic has dealt a further blow to Thailand’s tourism-based economy, and small businesses have suffered the most-the third wave of infections has dashed hopes for a rapid or stable recovery. “People are very cautious about their spending, and very cautious,” said Chatsiri, who ranked 32nd among the 50 richest people in Thailand this year, with a net worth of US$1.15 billion.
Bangkok Bank International Business
The pandemic has also affected investors’ confidence in Thailand’s largest banks, whose net profit in 2020 hit the lowest level in a decade, including Bangkok Bank. The stocks listed on SET rank among the top ten exchanges by market capitalization and hit a low of 88 baht ($2.73) in March last year. Although the stock price has risen to about 115 baht since then, it is still below the 2011 level.
The reason for
is easy to understand: Bangkok Bank reported that the Bank of Thailand had the largest decline in net profit in 2020, and these banks had to boost up due to concerns about the increase in bad debts and loss of loan reserves, which fell by more than 50% year-on-year to 17.2 billion baht (541 million baht) Dollar). According to this year’s Forbes Global 2000 list of the world’s largest companies, Bangkok Bank also lags behind regionally, ranking the sixth largest bank in Southeast Asia in terms of total assets, but only ranked 14th in terms of revenue.
“If you are a bank in Thailand, you need a growth strategy. Therefore, the entry of Bangkok Bank into Indonesia is of strategic significance”, V. Shankar, CEO of Gateway Partners, a private equity firm, and a former senior banker. The extension of
to Indonesia is a historic step on several levels. The first is scale: Indonesia has a population of 276 million, making it the fourth largest population in the world, after China, India and the United States. Then there is the demographic dividend: the average age is 30, and the middle class is growing rapidly. A huge domestic market with a gross domestic product exceeding US$1 trillion. As Indonesia’s emerging consumers age and become wealthier, they will drive demand for financial services in the long term.
Bangkok Bank Bangkok Branch, Thailand.
Bangkok Bank Bangkok Branch, Thailand. BRENT LEWIN / BLOOMBERG
In contrast, Thailand’s 67 million people are aging (20% of the population will be over 60 this year, and the average age is over 40), and infrastructure spending has fallen. GDP growth, which had slowed down, contracted by 6.1% last year. The situation in Indonesia is slightly better: GDP fell by 2.1% during the same period.
According to ADB’s April forecast, Thailand’s economy is expected to grow by 3% this year, while Indonesia will grow by 4.5%. “We see the growth potential of Indonesia in the next ten and twenty years,” said Chartsiri, and expects Permata to grow on this basis (the bank will continue to operate in Indonesia under its own name). “Then per capita income [roughly $ 4,000 in 2020], he added,” This is the level where we will see a major shift going forward. There will be many requirements for infrastructure, manufacturing, service industries, and consumer. ”
These opportunities extend to its clients, in Thailand and other parts of the region, including Hong Kong and Singapore, eager to do business there.” Thai companies also have different levels of investment in Indonesia, “Chartsiri told coal mining company Banpu. Construction and packaging group Siam Cement and petrochemical giant PTT said 4,444 Indonesian customers can, in turn, take advantage of the Bangkok Bank’s international network, which has long-term ties to the region. It has branches in almost all neighboring Asian countries for at least 25 years, and in some cases even more than