And so, it has come to pass that after being established in Thailand for more than 120 years that HSBC are experiencing “regrets” about their ONE only branch in Thailand and really, really want to build a banking business in the Kingdom….?
What took so long to realise this reality? Surely HSBC can make a mistake as readily as any other. Look at “the fine mess” HSBC have got themselves into by acquiring the Household Financial Corporation (“HFC”) in the USA. Now that is a sub prime debacle that will still take many years to play itself out AND, if and when it ever comes good, what have you got? A sub-prime lender in the USA! The best thing that HSBC management could do is admit it was a huge error of judgement to buy HFC and sell it again ASAP (and don’t do that again!!). As far as mistakes go, it will cost billions, take decades to fix and be forever gun-shy of doing anything similar again. Oh no wait, by then there will be new management in place and as we know, nothing is learned by making mistakes and go out and repeat them again and again. A bit of “grey hair” in senior management might offset SOME of this but unlikely.
Banking in Thailand has always been a mess and today is no different. The meltdown that manifested itself in Thailand in 1997 is still not over and the causes of that meltdown to a large extent have not been addressed. Banking in Thailand is characterised by weak management, corrupt banking officers, corrupt government officials, corrupt customers who can buy corrupted Bankers and a failure of prudent supervision of the regulators, mismanagement of the currency and interference by elected and appointed Government officers with the (Central) Bank of Thailand. Add these combinations together with undercapitalised banks and you have a recipe for disaster which unfolded during the 1990’s and hit the fan in 1996/7. So what else is new?
Prohibition of more prudently supervised foreign banks is tightly controlled because “we don’t want to give the evil farangs a slice of our cake…” now do we? Thailand is after all for Thai’s and if you are not Thai or a Thai banking group, you are not treated fairly because after all, you are very big, well-managed, prudently supervised and committed in the long term to building a sustainable banking business??!! We, in Thailand are adventurous, optimistic, embrace risk, manage on the fly and make hay while the sun shines. We know what this means to highly leveraged banking institutions now don’t we?
Thai banks have fallen from being “family owned’” banks to now being mostly institutionally owned with almost no bank being owned by a family group as was the case in earlier decades. This is because the banks had to be recapitalised so many times and the traditional family shareholders did not have deep enough pockets to stump up and maintain their stake. The result is dilution to the point where now, they are largely irrelevant as shareholders but often still do, for legacy reasons hold on to key management positions; those banking groups that have survived that is….
Many foreign banking groups have “come and gone” in Thailand mostly because of the lack of a level playing field. Restrictions on ownership, managment, business activities have combined to defeat even the most staunchand venerable foreign banking groups from establishing a beachead in Thailand. The oldest foreign banks like Standard Chartered Bank and HSBC who have been there longest have had ups and mostly downs. Standard Chartered has been a success story in Thailand of sorts acquiring the weak and deteriorating Nakornthon Bank when it was on it’s knees in 1998 or so and HSBC did not find a target. Just as well as many others that did find targets ended up choking on them and leaving with their tail between their legs (ABN AMRO Bank). A few other success stories are rare but UOB picked up the pieces of failed ABN AMRO’s adventures and are struggling to come good and recently CIMB of Malaysia has acquired Bank Thai in a deal that leaves many question marks about the decades it will take for that one to come good. The problems in Bank Thai are deep and wide.
So, maybe it is a blessing that HSBC have not acquired another (HFC) in Thailand which consumes mountains of capital, enormous management time for little or no return. If you really want to HSBC can acquire a bank which owns a bank in Thailand and by that means, by hook or by crook, you get what you want. Although very “round about” the Royal Bank of Scotland now has a branch in Thailand courtesy of acquiring ABN AMRO. But by now the indigestion of that deal makes having a branch in Thailand not the primary goal or objective but an incidental event in the overall scheme of things.
So HSBC, in Thailand (and Malaysia) for more than 100 years and desperate for a larger presence in Thailand, maybe the thing to do is acquire CIMB in Malaysia and expand your presence in Malaysia considerably and get the branch network you want in Thailand as well. There is also UOB from Singapore who could be a target (if the MAS will let you gobble them up…) and of course there is always the venerable Standard Chartered Bank that you could consume before lunch. Maybe you would find black Africa a little uncomfortable to digest but hey, you could package up and sell what you don’t want or what doesn’t fit, right? No doubt the new HSBC Regional CEO Sandy Flockart will be looking at “all the alternatives” while under pressure to grow, improve the numbers and ratios and avoid stepping into the poo or in turn becoming coprolite yourself.
Where there is a will, there is a way. The vulnerabilities in today’s global banking scene makes for many opportunities some good, some less good. But while the banks’ are re-positioning and rebalancing themselves, portfolio’s and assets there are opportunities to invest, acquire, for JV’s or strategic alliances and perhaps at a price and a time not to be repeated. So “sieze the day” and live long and prosper….
