Here we are at an IBM conference, tell us about how Kasikornbank is responding to the technological challenges it faces.
Lamsam: The attempt to not be a commodity is the only way to differentiate, to be able to respond to the customers' demands in an increasingly competitive environment. To do that you need IT support. If you can't do it good enough by yourself - which we have decided is the case - then you need to outsource it to someone like IBM. Hopefully that works in a way that will enable us to service our customers in a complete manner, in a way that will enable new products to be planned and in a way that will enable us to process more efficiently.
Is there a bubble developing in Thailand?
No. Land prices have not gone up except in the residential sector where there's pent-up demand, so that would not constitute a bubble. Stock prices still have good fundamentals behind them, even though they've gone up a lot. That's created a lot of enthusiasm but not anything that resembles what happened in the past. Not yet anyway. We continue to keep our eyes on it. So far I don't think one can remotely categorize it as a bubble.
You recently rebranded as Kasikornbank. Are you the same bank with a new name or does the new image reflect a change of direction?
Changing the name does not mean rebranding. Changing the name is just changing the name. It's still the same service. We didn't change the Thai name, only the English name. We changed from Thai Farmers Bank because it had a connotation of being an agricultural bank, which we have never been, at least not to any further extent than any of the other banks in Thailand. You can never change the people, but the name is easy.
Despite Thailand's growing economy the banking industry is making little headway in reducing its NPLs. Why?
That's true. The economy is growing as a result of the fiscal and monetary spending led by the government but the legacy of the past, the NPLs, is still around. The NPAs also; the land that has been foreclosed is still sitting there in asset management companies or in banks and they're not going to change hands easily, even though they might be pooled together in a different entity that manages them. That's being planned by the state.
Is the competition between the corporate bond and loan markets bad for banks?
People in the bond market have come down a lot in their ability to take risks. In the past only top names were able to sell bonds. Now it's come down to medium-sized companies with decent financial statements. People are avoiding having to put money in the bank. Lending of course is a challenge. There's always demand out there but then can you take the risk? If you don't take the risk the state banks will take it and they'll also take the good ones from you.
What is the greatest competitive threat you face: innovation from your competitors or irrational pricing?
At the moment it is irrational pricing. But when the market is growing you cannot argue too much. After the crisis everyone talked about having a risk management system, but there's a dilemma. If you want to keep up you have to lower the prices and hope that your asset quality doesn't collapse.
Tell us about Coffee Banking
That's just another twist in getting the people to come to you rather than somebody else. Competition brings presure on to everybody so you have to offer something different.
There are 13 commercial banks in Thailand. Finance ministry adviser Niphat Bhukkanasut has been quoted as saying that four banks would be more than enough and that three might be even more appropriate. Do you agree that there needs to be consolidation?
I wonder where he acquired that kind of wisdom. You can say any number; I don't think there's an absolute correct one. At the moment I don't see the need in a big way. State banks combining does not constitute standard consolidation. Only when you see private banks joining together can you believe consolidation has come to Thailand. So far that has not happened, but rationalization is going to be a huge issue in the future.
Has foreign competition reached a plateau?
It's still there but they're stuck in the same domestic framework of having the ability take the risk. So foreign competitors are certainly putting pressure on the local market but they have not run away with it.
The government's financial sector master plan relaxes rules governing foreign banks, what other effects will the master plan have on your business?
It will allow foreign banks to acquire a larger share in a local bank. For me that's already accepted. They can own a financial institution with branches and become direct competition for local banks and that's why we're trying very hard to come up to speed; so we can stand up to that kind of competition.
We've seen Maybank and DBS creating cross-regional banks. Is there value in going regional and would you consider it?
Not in the near term. My focus is Thailand; there's still a lot of things that need to be done in Thailand. I would be stretching my own resources if I tried to do that. Of course one has to keep an eye on China, it's a force that has to be reckoned with. But to start lending in a big way in China is risky.
After the financial crisis in 1997 Kasikornbank issued capital securities with high funding costs. You recently announced that you plan to repay these from held-over profits. When will you do this?
I think we have enough of a capital base to take that kind of hit. If we get the green light from the Bank of Thailand we're going to do it in January.