Krung Thai Bank Public Company Ltd.

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Krung Thai Bank Public Company Ltd.

35 Sukhumvit Road, Khlong Toei Nu
Bangkok 10110
Telephone: +66 2 255 2222
Fax: +66 2 255 9391
Web site:

Public Company
Employees: 15,000
Total Assets: $27.47 billion (2003)
Stock Exchanges: Thailand
Ticker Symbol: KTB
NAIC: 522110 Commercial Banking

Krung Thai Bank Public Company Ltd. is Thailand's largest bank and also one of four banks controlled by the Thai government. Krung Thai boasts the largest banking network in Thailand, with more than 500 branches, including nearly 100 in Bangkok. The bank also operates nearly a dozen branch offices overseas, including in Hanoi, Vietnam; Mumbai, India; Phnom Penh, Cambodia; Vientiane, Laos; Rangoon, Burma; Singapore; the Cayman Islands; Los Angeles; New York City; and Kunming, China. Krung Thai also operates the largest network of automated teller machines in Thailand. Since 2004, Krung Thai has stepped up its expansion of its automated teller network, adding more than 250 machines that year, and launching plans to add more than 600 ATMs in 2005. Krung Thai offers a full range of private and corporate banking services and products, including deposit services, loan and mortgage products, credit cards, and other services. The bank is a major lender to Thailand's business sector, especially to small and medium-sized businesses, and also provides lending for the country's municipal and national governments. The bank's lending policies are often dictated by the Thai government. For example, Krung Thai has been given the objective of providing grants of up to THB 1 million ($24,000) to every Thai village. The bank also has been given a directive to provide loans to the country's poor rural population. Following another government directive, Krung Thai set up a separate Islamic Bank with features specifically tailored to the religious needs of the country's southern Muslim population. These government-inspired lending imperatives have often brought Krung Thai into difficulty, however, saddling the bank with higher-than-average bad debt ratios. Krung Thai underwent a partial privatization in 2004, listing 27 percent of its stock on the Thailand Stock Exchange. The Thai government controls the remainder of the company.

Political Banking Tool in the 1960s

Banking remained, in large part, unknown in Thailand, then known as Siam, through the mid-19th century. Pawnshops, often run by Chinese immigrants, which appeared in the 1860s, remained the country's only financial institutions until much later in the century.

The first full-fledged bank to be set up in Thailand was a branch of the British-owned Hong Kong and Shanghai Bank, which opened in Bangkok in 1888. The country's banking sector remained driven by foreign interests into the beginning of the 20th century, with the arrival of Chartered Bank in 1884, and France's Banque de l'Indochine, established in 1897. Foreign banks dominated the country's financial scene into the mid-20th century; by then there were a dozen foreign banks operating in the country. These banks focused primarily on financing trade between their home countries and Thailand, however.

In 1904, a group of Chinese immigrants came together to form their own bank. Initially called the "Book Club," the bank was renamed as Siam Commercial Bank in 1906. Other banks followed over the next several decades, including the Providence Bank, Wang Lee Bank, established in 1933, the Tan Peng Chuan Bank, formed in 1934, and the Bank of Asia, in 1939. Most of the country's banking sector remained privately controlled, and for the most part were owned by Chinese groups and families, or by the country's noble class.

The rise of a domestic banking industry brought the need to create a central banking organization. The creation of the National Banking Bureau in 1939 provided an initial effort toward providing centralized banking functions. A formal central bank, the Bank of Thailand, was then established in 1942.

The Bank of Thailand and the Thai government began to assert their sovereignty over the Thai financial market in the mid-1950s. The passage of new legislation in 1955 restricting foreign banks' entry into Thailand encouraged the growth of the domestic sector.

Yet the Thai government itself became an active participant in the country's business and financial sectors. The passage of the Government Organization Bill in 1953 gave the Thai government the right to set up its own businesses as a means of stimulating the country's economic development, providing jobs as well as public services. These businesses were provided with funding from the country's budget, and spurred the creation of a number of important Thai companies. Among these were the Thai Playing Cards Manufacturing Factory, the Thailand Tobacco Monopoly, the Liquor Distillery Organization, and, later, the Government Lottery Office.

The bill also inspired the government to create a number of banks targeting different areas of the nation's economy. For example, the government set up the Government Housing Bank, the Export-Import Bank of Thailand, and the Government Savings Bank. Another early government-owned banking initiative was the creation of the Agricultural Bank.

In 1966, the Thai government took over a private bank, the Providence Bank Limited, and merged it with the Agricultural Bank, forming a new major national bank, Krung Thai Bank. Krung Thai was created as a state-owned enterprise, placed under control of the Ministry of Finance. As such, and in order to emphasize the government's intention to transform Krung Thai into one of its primary financial arms, Krung Thai adopted the Ministry of Finance's symbolthe mythical Wayupak birdas its own logo.

Krung Thai launched operations with assets of more than THB 4.5 billion and deposits of THB 4.2 billion. The bank began opening new branches throughout Thailand, and by the late 1980s had established the largest banking network, with more than 288 branches operating in every one of the country's provinces. By then, too, Krung Thai had added international operations, opening its first foreign branch in New York in 1982. Other branches were to follow over the next two decades, and by 2004 the bank had branches in Vietnam, India, Cambodia, Laos, Burma, Singapore, the Cayman Islands, and China, as well as a second U.S. office in Los Angeles.

Krung Thai and the government's other banks enabled the Thai government to take control of the domestic banking market during the 1970s. By the beginning of the 1980s, the country's financial market was dominated by a handful of primary government-owned banks, which in turn were closely guided by the Bank of Thailand. Although a number of foreign banks remained present in Thailand, they had become only marginal players.

Thailand's banks, meanwhile, played an important role in financing the country's strong economic growth during the period. Yet the banks' lending policies more often reflected political interests rather than financial sense. By the middle of the decade, the banking sector had slumped into crisis and a number of the country's banks were on the verge of collapse. In 1987, Krung Thai's role evolved to include the rescue of the failed Thai banks. One of these was the Asia Trust Bank, which had been rocked by a financial scandal earlier in the decade. After that bank, in the interim renamed as Sayam Bank, collapsed in August of 1987, its assets were transferred to Krung Thai. As a result, Krung Thai emerged as the country's leading bank, with the largest branch office network.

Government Cleanup Vehicle in the 2000s

Krung Thai grew steadily through the 1990s. In 1989, the bank's shares were first listed on the Thailand Stock Exchange, although Krung Thai remained under government control. In that year, also, Krung Thai was the first of Thailand's banks to be given the right to roll out an automated teller network. In 1994, the company was reincorporated as a public limited company, with its English name changed to Krung Thai Bank Public Company Ltd. The following year, Krung Thai was given the new status as a Group 1 State Enterprise, acknowledging its position as the country's largest bank.

During this period, the bank was led by Sirin Nimmanahaeminda, brother of Thai Finance Minister Tarrin Nimmanahaeminda. Appointed in 1992, Nimmanahaeminda led Krung Thai into a period in which, on paper at least, Krung Thai emerged as one of Thailand's most profitable banks.

Yet the economic crisis that began in Thailand in 1997 and swept through the Asian region exposed the extreme vulnerability of the Thai banking sector. Unsound lending policies, and particularly unbridled lending during Thailand's property boom in the early part of the decade, brought Thailand's banking sector to its knees.

The government tapped Krung Thai, with its reputation for profitability, to play a central role in the restructuring of the Thai banking sector. Over the next two years, Krung Thai absorbed several of the country's teetering banks, including First Bangkok City Bank, which was merged into Krung Thai in 1998.

Company Perspectives:

Strategic Intent: Krung Thai Bank intends to be a "Convenience Bank."

A center of wide variety of quality financial products that meet people's needs by providing core banking business in accepting deposits, lending, accepting payments and collaborating with other businesses in offering the best products for sale through the Bank.

Located in suitable areas, convenient to buy, easy to pay, no wasted time. Open daily at any hour.

Mission: Presenting financial services that reach the target customer segments with speedy and accurate services at competitive prices through branch network covering all areas nationwide by adhering to good management principle.

By 1999, however, Krung Thai's true financial position was revealed with the leak of an internal auditfully 84 percent of the bank's loans were, in fact, nonperforming. The resulting scandal led to the departure of Sirin Nimmanahaeminda. By September 2000, the Thai government was forced to come to Krung Thai's rescue, taking over THB 520 billion ($12.22 billion) of Krung Thai's worst performing loans, essentially cleaning the bank's balance sheet. In exchange, the Thai government took greater control of Krung Thai's stock, holding more than 92 percent by the end of the decade.

Krung Thai began a restructuring, including cutting back a payroll that had grown to more than 15,000. The bank also introduced computer-driven information systems for the first time. The bank remained a central part of Thailand's redevelopment plans, now led by new prime minister and tycoon, Thaksin Shinawatra. Under Shinawatra, Krung Thai was encouraged to underwrite the growth of the country's business sector. Into the mid-2000s, Krung Thai gained a great deal of new business, although much of that came from picking up defaulted business loans from other banks.

On a positive side, Krung Thai enacted another government initiative, that of bringing so-called Islam banks to the country's predominantly Muslim population in the south. The move, seen as a means of easing tensions in the regions, provided banking facilities adapted to Islamic law for the first time. Krung Thai set up the first branch of its new Islamic banking service at the end of 2001. By the end of 2002, the service had opened several more branches and had attracted deposits of more than THB 100 billion.

Krung Thai continued to expand its loan portfolio, which had grown 70 percent by 2004. The bank's role as financial backer for the country's small businesses and poor was underscored by a series of television commercials portraying it as a white knight come to rescue small businessmen. Into mid-decade, Krung Thai's aggressive lending policies had given it control of some 17 percent of Thailand's total commercial lending.

In October 2004, Krung Thai was partially privatized again, with a new listing of 27 percent of its shares on the Thailand Stock Exchange. The share offering was highly successful, yet quickly ran into trouble. At the end of 2004, the bank revealed that its nonperforming loan rate had risen to 12 percent, sparking fears of a new lending crisis. Nonetheless, most analysts considered the bank financially sound, despite the higher-than-expected bad loan rate.

Krung Thai had begun to reinvent itself as it moved toward mid-decade. Under bank President Viroj Nualkhair, and his successor, Apisak Tantivorawong, who took over in December 2004, Krung Thai began repositioning itself as a convenience bank, with plans to step up its fee income revenues. As part of that plan, the bank began expanding its bank network, with 40 new branches to open through 2005, and its ATM network. In 2004, the bank added 250 new ATMs and expected to add as many as 600 through 2005. As Thailand's largest bank, Krung Thai remained an essential component in the country's economy.

Principal Competitors

Sumitomo Mitsui Banking Corporation; Bank of Tokyo-Mitsubishi Ltd.; Industrial and Commercial Bank of China; Mizuho Corporate Bank Ltd.; China Construction Bank; Bank of China Ltd.; Agricultural Bank of China; Hongkong and Shanghai Banking Corporation Ltd.; Japan Bank for International Cooperation; Mitsubishi Trust and Banking Corporation; Kookmin Bank.

Key Dates:

Krung Thai Bank is formed from the merger of government-owned Agriculture Bank and privately held Providence Bank as a state-owned enterprise.
The bank opens its first foreign office in New York City.
Krung Thai absorbs the assets of failed Sayam Bank (Asia Trust Bank).
Krung Thai introduces its first ATM machines in Thailand; the bank lists stock on the Thailand Stock Exchange.
The bank is registered as a public corporation; the English name is changed to Krung Thai Bank Public Company Ltd.
Krung Thai absorbs the failed First Bangkok City bank along with several other banks during the Thai banking crisis.
The Thai government takes over $12 billion in nonperforming loans from Krung Thai.
Krung Thai begins developing a new plan as a convenience bank, planning to open 40 new branches and 850 new ATMs by the end of 2005.

Further Reading

Arnold, Wayne, "Investors Worried and Angry Over Thai Bank's Risky Loans," New York Times, August 25, 2004, p. W1.

Cholada, Ingrisawang, "Thai Bank to Expand Its China Base," Bangkok Post, September 17, 2001.

Chudasri, Darana, "Thai Bank Hopes to Wrap Up Its Privatization Plans in Fourth Quarter," Bangkok Post, January 17, 2002.

Hamlin, Kevin, and Robert Horn, "Chatu Mongol Took the High Road," Institutional Investor International Edition, February 2000, p. 13.

Kazmin, Amy, "Krung Thai Cleans Up Its Balance Sheet," Financial Times, September 22, 2000, p. 34.

, "Rush to Lend Backfires on Krung Thai," Financial Times, August 9, 2004, p. 18.

"Krung Thai Privatization Next Test for Thailand's Markets," Euroweek, July 26, 2002, p. 16.

"Picking Up the Pieces: After the Furor, Krung Thai Bank Moves On," AsiaWeek, March 13, 2000.

Somruedi, Banchongduang, "KTB Aims to Boost Fee Income," Nation, December 17, 2004.

M. L. Cohen

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