A healthy bank has healthy customers
“The bank needs to change direction to offer financial advisory services rather than loans.” – Piti Tanthakasem, Managing Director, TTB
TMBThanachart Bank Plc (ttb) plans to focus on creating sustainable growth and the well-being of customers, Managing Director Piti Tanthakasem told the Bangkok Post in an exclusive interview.
He said the bank is adjusting its operations for long-term sustainable growth.
The bank is a merger between TMB Bank and Thanachart Bank, the integration of which was completed last year.
Mr. Piti said “customer orientation” is the bank’s key strategy, while improving customer well-being is a key objective.
Reducing the debt burden of customers is one way to improve their well-being, he said, as the country is drowning in household debt, which has affected the Thai economy.
Thai household debt represents around 90% of GDP.
The research arm of ttb analytics bank predicts that the country’s household debt ratio will rise to 93% by the end of this year, due to the prolonged impact of the pandemic.
Mr Piti, who is a member of the prime minister’s economic advisory team, said household debt has been rising for several years, but the problem has been made worse by the pandemic, which has hit individuals and small borrowers. and medium-sized enterprises (SMEs).
He said boosting people’s incomes and wealth should help reduce the debt burden and reduce household indebtedness.
Financial institutions are lenders, which means they play a role in increasing household debt, Piti said. The bank needs to change focus to offer financial advisory services rather than loans, he said.
Mr Piti said the bank does not need to offer all financial products to a client to grow its business, but should focus on financial advice.
The definition of bank welfare covers four financial areas: spending, saving, investing, and protection.
He said the bank’s focus in the future will be on providing personalized financial service to customers rather than concentrating products. The bank may offer a client other financial products to help them manage their personal finances or initiate long-term wealth creation, Piti said.
An example of the change in strategy is in individual loan approvals, he said. The bank will consider whether the loan can constitute the client’s wealth in addition to considering their debt repayment capacity in the loan analysis.
âFor ttb, sustainable growth must take into account both the customer and the bank,â said Piti.
“This is mutual growth, rather than one-sided loan growth for the bank. The latter is not sustainable in the long term.”
According to the National Council for Economic and Social Development, Thai household debt stood at 14.1 trillion baht, or 90.5 percent of the country’s GDP in the first quarter of this year.
He said about 50% of the country’s total household debt is unsecured personal loans, from non-banks, specialized financial institutions and cooperatives. The interest rates of unsecured loans are higher than those of secured loan products.
Much of the household debt in developed countries comes from secured loans, especially mortgages and auto loans, Piti said.
He said technological development is another basic strategy to simplify business sustainability. In addition to the bank’s technology upgrades, ttb helps its customers, especially retailers and SMEs, to build wealth and grow sustainably through the digital platform.
The banking industry is increasingly migrating to the digital platform, which can enhance the prosperity and sustainability of banks and customers, Piti said. With digital technology, banks can help clients such as SMEs to earn new income.
Retail customers should be equipped with digital capabilities and personalized financial services, he said.
âIf we don’t change business operations now and keep doing the same things, we could accumulate higher risks,â Piti said.
“We have decided to switch to more sustainable practices.”
Previously, TMB had launched innovative deposit features and money transfer fees. It took about 10 years for the industry to adapt, he said.
In the digital age, ttb expects the concept of sustainable growth to take less than a decade to adopt, Piti said.
In view of the digital disruption, traditional banking businesses face tighter margins, while bank profits have declined due to the impact of Covid-19.
The bank expects sustainable growth to improve long-term profitability, with digital technology helping to save on operating costs, he said.
Operational and risk costs are the main expenses of banking activities, Mr. Piti said.
The digital platform service will reduce operating expenses and support lean organizations, while data analytics is expected to improve credit risk analysis, control asset quality and reduce cost of risk, a- he declared.
TMB’s traditional banking service cost-to-income ratio was 48-49%. For the second quarter of this year, ttb’s financial ratio was 46.4%.
With integration and digital transformation, ttb’s cost-to-revenue ratio is expected to decline further to 42-43% in the future, Piti said.
The two banks merged branches and employees, improving staff skills to adapt to the digital age, he said. Consolidation enabled ttb to save on operating costs.
TMB’s cost of risk was in the range of 1.7 to 1.9%, while Thanachart Bank was 1% with a focus on auto loans. The cost of risk for ttb is expected to be around 1.5%, Piti said.
Loan Analysis Method
He said that although new daily infections in Thailand have declined, the country’s economy and banking sector still face several uncertainties. The tourism sector in particular will take longer to recover.
The revenue structure of SMEs is expected to decline over the next few years, Piti said. In view of these prospects, the bank needs to adjust both its existing debt restructuring program and the analysis of new SME loans, in accordance with the change, he said.
Banks should support clients of SMEs seeking new sources of revenue and strengthening operations through digital technology.
The Thai Bankers Association has developed a smart financial platform to help SMEs earn new income in the digital age. The platform can also help banks, including ttb, to better analyze business feasibility and new customer revenue structures, Piti said.
“Helping SMEs to restructure their longer-term debt is a major challenge for the banking sector, including ttb. Long-term debt restructuring is expected to continue in the fourth quarter of this year until next year.” , did he declare.
Increase in credit rating
Last month, Fitch Ratings upgraded the long-term international rating from ttb to BBB from BBB- up a notch and upgraded the national long-term rating from âAA + (tha)â to âAA- (tha)â. The outlook is assigned as “stable”.
For major rating drivers, Fitch Ratings said the bank has successfully completed its integration as planned and, as a result, its systemic importance to the country’s economic and financial system has increased.
In addition, ttb has been identified as a consistently important national bank, as the Bank of Thailand announced in August.
Since the announcement of the merger plan, the bank has continued to receive credit rating upgrades, starting with Moody’s Investor Service in 2019, S&P Global Ratings in 2020 and the latest Fitch Rating on September 16, 2021.
Upgrades to these three leading agencies, especially when the global economy was pressured by the pandemic, reflect a positive view of the post-merger potential and financial strengths of the bank, including the adequacy capital, liquidity position and asset quality, said Piti.
These notes also indicate that the bank is ready to withstand a prolonged pandemic impact for customers and investors, he said.