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The $2.7 billion acquisition of Bank Permata by Bangkok Bank is not only the bank’s greatest by value in its 76-year existence, but it also promises to be transformative. The agreement will transform Bangkok Bank from a big Thai bank with a strong Asian network into one with a significant presence in two of Southeast Asia’s most important nations, laying the framework for years of sustained expansion.
It’s also a personal milestone for Bangkok Bank president Chartsiri Sophonpanich, 62, as it allows him to build on his family’s tradition while furthering the bank’s regional ambitions, which were pioneered by his grandpa Chin, the bank’s creator and first president in 1944.
“Normally, we expand naturally,” Chartsiri adds in a rare video interview from his office at the bank’s Silom Road headquarters. “We don’t expand by acquisition.” Nonetheless, the chance to invest in Indonesia, one of the world’s largest and fastest-growing countries, was too attractive to pass up.
The closely watched shift in Asian bank consolidation comes as Thailand’s commercial banks seek growth outside of the country as domestic headwinds erode profitability. Bangkok Bank finalized the purchase of an 89 percent stake in Bank Permata from Standard Chartered and Jardine Matheson’s Indonesian subsidiary Astra International in May last year, as disclosed in a conditional offer in December 2019. After a mandatory tender offer in October, it increased the percentage to 98.71 percent. The Indonesian branches of the two banks were merged in December of last year.

Building of PermataBank in Jakarta, Indonesia.
Bangkok Bank provided this image.
Bank Permata, which operates under the name PermataBank, provides Bangkok Bank with 4 million new clients, 300 countrywide offices, and $13.8 billion in additional assets, bringing the bank’s total assets to around $126 billion in the first quarter. More importantly, it strengthens its position as the go-to lender for clients’ regional objectives. Chartsiri describes PermataBank as a “strategic purchase.”
“The regional market is expanding significantly faster than Thailand, and we can expect this to support our further expansion with international [loans] accounting for more than 24% of our portfolio.”
The soft-spoken third-generation leader of Thailand’s largest bank by assets is taking a risky step to reignite development. The bank has struggled to maintain momentum in its home market, despite slowing economic growth, heavy consumer debt, and cheap interest rates, after rising at rapid speed under Chartsiri’s father and grandfather.
The pandemic has inflicted another blow to Thailand’s tourism-dependent economy, with small enterprises being among the most hit—a third wave of illnesses has dashed hopes of a speedy or steady recovery. “People are cautious and cautious about their spending,” adds Chartsiri, who has a net worth of $1.15 billion and is ranked No. 32 on this year’s Thailand’s 50 Richest list.

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The pandemic also harmed investor trust in Thailand’s top institutions, including Bangkok Bank, which had its lowest net profit in ten years in 2020. In March of last year, the SET-listed stock, which is among the ten largest by market capitalization on the exchange, hit a low of 88 baht ($2.73). While the stock has now rebounded to around 115 baht, it is still trading at a discount to levels seen in 2011.
It’s simple to understand why: Bangkok Bank reported the steepest drop in 2020 net profit among Thailand’s lenders, falling more than 50% to 17.2 billion baht ($541 million) year on year. Thailand’s lenders have had to bolster up loan-loss reserves due to fears about mounting bad debt. According to this year’s Forbes Global 2000 list of the world’s largest firms, Bangkok Bank is Southeast Asia’s sixth-largest bank by total assets but only 14th in terms of profitability.
“If you’re a Thai bank, you’re going to require a growth strategy.” According to V. Shankar, CEO of private equity firm Gateway Partners and a former senior banker, “Bangkok Bank’s entry into Indonesia makes strategic sense.”
On various ways, the expansion to Indonesia is a watershed moment. The first is scale: behind China, India, and the United States, Indonesia has the world’s fourth-largest population with 276 million people. Then there’s the demographic dividend: with a median age of 30 and a rapidly expanding middle class, Indonesia has a massive domestic market worth over $1 trillion. Indonesia’s growing customers will drive long-term demand for financial services as they become older and wealthier.

In Bangkok, Thailand, there is a Bangkok Bank branch.
Bloomberg/Brent Lewin
Thailand’s 67 million inhabitants, on the other hand, are growing older—20 percent of the population will be over 60 this year, and the average age is over 40–and infrastructure spending has slowed. Last year, already sluggish GDP growth dropped by 6.1 percent. Indonesia fared marginally better, with a 2.1 percent drop in GDP over the same time period.
According to ADB predictions released in April, Thailand’s GDP will increase by 3% this year, while Indonesia’s will grow by 4.5 percent. “We see Indonesia’s economic potential over the next ten, twenty years,” Chartsiri says, adding that he expects Permata to grow as a result (the bank will continue to operate under its own name in Indonesia). “Then there’s per capita income,” he continues, “which is approaching the point where we’ll see a substantial transformation moving forward.” There will be numerous infrastructure, manufacturing, service sector, and consumption requirements.”
Customers in Thailand and elsewhere in the area, including Hong Kong and Singapore, who want to do business there can take advantage of these prospects. “There are also various levels of Thai firms’ involvement in Indonesia,” Chartsiri notes, citing coal miner Banpu, packaging and construction company Siam Cement, and petrochemical behemoth PTT as examples.
Customers in Indonesia can use Bangkok Bank’s international network, as the bank has a strong history in the region. It has a presence in practically all of its Asian neighbors, including Hong Kong, Singapore, and Tokyo, for at least 25 years, and in some cases over 60 years. Aside from assisting Thai enterprises in Indonesia (and vice versa), Bangkok Bank’s larger reach may attract corporate clients from other countries. Bangkok Bank has expanded its Indonesia branch network to 300 locations (from three previously). It is now a truly local bank in Indonesia.

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Then there are international loans, which are likely to rise at a quicker rate than total loan growth this year, which is expected to be between 3% and 4%, as the bank chases new corporate customers such as Chinese companies seeking to diversify and invest in ASEAN.
The Permata acquisition increased the bank’s net interest income by 8% to 77 billion baht last year, indicating that tapping Indonesia will pay off. With a turnover of the board of commissioners and board of directors at Permata and an injection of $744 million in new capital, Chartsiri moved fast to consolidate the merger.
Meanwhile, in Thailand, a recovery in exports as global demand improves the outlook for Bangkok Bank’s corporate customers—manufacturers receive roughly a third of the bank’s loans, while SMEs receive about a quarter. Nonperforming loans at Bangkok Bank were 3.7 percent at the end of the first quarter, down from 3.9 percent at the end of the previous year. Bangkok Bank reported earnings of 6.9 billion baht, which were up twice from the previous quarter but down 10% year on year.
According to Parson Singha, senior director at Fitch Ratings, “the [bank’s] loan-loss reserve coverage is good” (Thailand). “Its strong relationship with large corporates is BBL’s [Bangkok Bank’s] core competitiveness,” said Jesada Techahusdin, a research analyst at Maybank Kim Eng (Thailand) in a report. The long-term return on investment (ROI) is 7.8% of capital. However, a robust balance sheet with significant NPL coverage compensates for this.” He expects corporate loans to account for 3% of total loan growth this year.

THE PERMATA MERGER BOOSTED THE BANK’S NET INTEREST INCOME BY 8% TO 77 BILLION BAHT LAST YEAR, IN AN EARLY SIGN THAT TAPPING INDONESIA WILL PAY OFF.

Chartsiri has worked in the banking industry for a long time. He has been the president of Bangkok Bank since 1994. (he also sits on the board of Bangkok Post Co., which is the licensee partner for Forbes Thailand). When he became over, the bank was the largest commercial bank in Southeast Asia by assets, and Thailand’s economy was thriving, powered by funds borrowed from outside.
The Asian financial crisis began in Thailand barely three years later, when the baht was allowed to float in July 1997, and its value versus the dollar plummeted by more than 50%. As the virus swept across Asia, Thailand became patient zero, with enterprises plagued by large unpaid debts and 56 Thai finance firms effectively collapsing. Bangkok Bank’s market capitalization has dropped by 75% to $2 billion.
When faced with the most difficult challenge of his career, Chartsiri knuckled down and spent the next three years clearing up the bank’s poor loans and selling part of the family’s holdings in the company to raise funds. He was successful, and Bangkok Bank was able to resume its steady growth path (and the region as a whole started to recover as well). The bank’s sturdy foundation was put to the test during the global financial crisis of 2007-2009, which it weathered largely undamaged.
However, Bangkok Bank has recently been put to the test. Kasikorn Bank and Siam Commercial Bank, who were once smaller competitors, have already surpassed Bangkok Bank in terms of market capitalization and net profit. One important aspect is that Bangkok Bank needs to improve its e-banking capabilities. In a report, Harsh Wardhan Modi, co-head of Asia ex-Japan bank research at JPMorgan in Singapore, who has a neutral recommendation on the bank’s stock, states, “[The bank] looks to have lagged in creating digital capabilities at pace with peers.”

Chartsiri at the Presidential Lounge of Bangkok Bank.
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