DBS THAI DANU BANK TAKES STEPS TO POSITION BANK FOR FUTURE
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Announces Aggressive Plan To Return Bank To Operating Profitability
BANGKOK, DEC. 23 - DBS Thai Danu Bank (DTDB) today announced a broad plan to put behind it problems arising from the economic downturn in Thailand and Asia.
The Bank said it would re-focus its sales and marketing activities on more credit-worthy, higher value business, rationalize its branch network in Thailand, undertake a bank-wide review of staffing levels and deal even more assertively with the non-performing loans in its portfolio.
Steps would include the merger of 35 branches in Thailand, and significant staff reductions over the next six months.
DBS Thai Danu's plan announced today was the most recent from Thai banks struggling to recover from the economic downturn that hit Thailand in 1997. DTDB joins other Thai banks that have announced branch mergers, staff reductions and other cost-cutting moves during the past eleven months.
Pornsanong Tuchinda, DTDB President, said the steps announced today were not aimed primarily at reducing costs, but carried important benefits as the bank responds to changes in the markets for banking and financial services.
"We are absolutely committed to putting DBS Thai Danu Bank back on the sound financial footing it has enjoyed for most of its history.
"Like other banks in Thailand and the region, we have been hit very hard by the recent economic downturn. The level of non-performing loans in our portfolio is unacceptable to us, and while we are aggressively pursuing a clean up of our loan portfolio, this alone will be insufficient if we are to achieve our goal of nursing DBS Thai Danu Bank back to financial health.
"Our consolidation of these 35 branches into a smaller, healthier and more competitive bank of 60 branches in Thailand, and planned additional staff reductions, is bitter but necessary medicine if we are to successfully serve the banking and financial needs of the people and businesses of Thailand.
"On a more positive note, however, this move should also be seen as a signal that DBS Thai Danu is intent on competing, and committed to bringing world-class banking standards to Thailand in the process.
"In the past, too much of the focus in banking has been on brick and mortar branches and establishing branch networks. Where banking is going today requires a focus on innovative financial products, high-quality service delivery and the ability to provide those products and services to individual and commercial customers wherever in the world they need it, seven days a week, 24 hours a day.
"We cannot get there without taking the steps we are announcing today. They are a prerequisite for future success, and unpleasant as they are, the need is undeniable" Pornsanong said.
Under the plan, 17 DBS Thai Danu branches in Bangkok and 18 branches outside Bangkok will be merged beginning in January 2000. The merger process is expected to be completed by late March.
Branch consolidations have been planned to minimize inconvenience for DBS Thai Danu Bank customers. The bank said that customers' accounts would be automatically transferred to new branches with no action required by customers. Customers will be informed of branch consolidations as they occur, and a telephone hotline will be established by DBS Thai Danu to respond to customer queries.
All DTDB staff and systems employed in branches marked for consolidation will be transferred to new branches until the process is complete.
Simultaneously, DTDB said it had undertaken a bank-wide review of staffing levels, and expects significant staff reductions to be implemented during the first half of 2000. These reductions will come from the branch network as a result of consolidation, as well as from other departments.
Bank officials said as many as 700 staff could be affected. They emphasized that performance, skills and operational requirements, and not geographic location, would be the key criteria in identifying staff redundancies. Under the plan, staff made redundant will receive up to 20 months salary based on their length of service.
DBS Thai Danu Bank is majority owned by DBS Bank of Singapore, Southeast Asia's largest bank. DBS has been closely involved with DBS Thai Danu Bank since its acquisition in 1998, providing management, systems and marketing support.
DBS announced recently that business units of its subsidiaries in Asia, including DTDB, would report directly to business heads in Singapore in an effort to leverage DBS' business and marketing assets, and drive its various individual and institutional businesses on a regional basis.
A number of senior DBS staff have been seconded to DTDB for an indeterminate period to assist during this transition. A DBS Regional Integration Centre, formed to drive the harmonization of information technology, policies and procedures among all of DBS' subsidiaries in Asia, operates from the DTDB headquarters in Bangkok.
SUMMARY
DTDB REPOSITIONING PROGRAM
There are 4 key action areas in the repositioning program:
- SPEEDING REGIONAL INTEGRATION
- Launch of the Regional Integration Model to further integration with DBS and other regional subsidiaries.
- DTDB business units will now report to business leaders in Singapore.
- Objective is to make DTDB part of a world class regional bank and get staff to think, act and be regional.
- COST RESTRUCTURING
- Branch Consolidation:
- In order to refocus and restructure the retail business, we have to withdraw from the less attractive markets where business potential is limited and rationalize overlapping branches.
- A total of 35 branches will be merged into a smaller but healthier and more competitive complement of 60 branches in Thailand. A total of 17 DTDB branches in Bangkok and 18 branches outside of Bangkok will be merged.
- All DTDB staff in branches marked for consolidation will be transferred to new branches until the consolidation is complete.
- Staff Reductions
- The Bank will conduct a bank-wide personal review of staffing levels over the next few months. The review will involve all bank staff and will be based on performance, skills levels, new operational requirements, and not geographic or branch location.
- About 700 staff will be affected by this exercise. These reductions will come from the branch network as a result of consolidation, as well as from other departments.
- Decisions on staff retrenchments will be announced in March 2000. Under the plan, staff made redundant would receive up to 20 months' of salary based on length of service with the bank.
- Other Cost Reductions
- The Bank will also embark on a large-scale exercise to reduce other non-personnel costs in order to reduce operating expense to an acceptable standard.
- As many non-essential costs as possible will be taken out.
- This review will be conducted in every DTDB department.
- ENHANCING REVENUE GROWTH
- Business units are gearing up with various initiatives and repositioning programs to take advantage of opportunities for aggressive business expansion. The key initiatives include:
- Corporate Banking Repositioning
- Retail Banking Marketing Push
- Fee Income Enhancements
- ATTACKING OUR NON-PERFORMING LOANS
- We are making solid progress in reducing the non-performing loans in our portfolio, but progress is neither as great nor as fast as we wish.
- We are aggressively exploring various ways to resolve the existing portfolio of NPLs in a more efficient and effective manner. This may involve the use of third-parties to service the most difficult portions of our existing NPL portfolio and work to recover all outstanding balances.
- No option for turning non-performing loans into performing loans is going unexplored.
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