Why UOB is on its way to becoming Thailand’s biggest small bank

It eyes doubling market share to 4%.

According to CIMB, UOB presented a good perspective of its Thai operations and what it is doing to compete against the bigger local banks.

UOB Thai currently generates 4.2% of group pretax profit. It has 2.4%-3.0% deposit and loan market share. It aims to double its market share to ~4% in 2015.

Here's more from CIMB:

UOB Thai is the largest among the small banks in Thailand, with a similar number of branches to CIMB Thai but more branches than HSBC, StanChart and ICBC.

Operations are still sub-scale but as revenues come through, the cost ratio will gravitate from the current 62% to ~50% and the 8.6% ROE is likely to improve.

To raise revenue and manage NPLs, UOB has a targeted approach, focusing on the affluent consumer and funding Thai corporates’ regional expansion.

Thailand does not have a current account deficit problem but has built up consumer debt based on populist policies, which is now a concern. Our strategists do not think that Thailand’s problems are in the same league as Indonesia’s though.

As such, UOB’s Thai exposure is less of a worry to us. Also, UOB has been relatively slow and conservative in building both its Thai and Indonesian franchises, which turns out to be positive now that Indonesia faces major macro headwinds and Thailand is slowing down.

It will not be easy for UOB Thai to grow into the size of BAY and TBANK unless there are franchises to buy in the coming years.