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International -- The Stars of Asia -- Financiers
Banthoon Lamsam (int'l edition)
President -- Thai Farmers Bank -- Thailand
Although he is the scion of one of Thailand's oldest, most conservative banking families, Banthoon Lamsam's management style is downright iconoclastic. He's brought in foreign consultants to help him run Thai Farmers Bank, aggressively written off bad loans, and introduced a "performance culture" for his 10,000 employees, including a controversial early-retirement plan for 2,000 staff unable to keep up with new technology. "You have to be a bad guy if you want to change anything," Banthoon explains.
As a result, the 47-year-old graduate of Princeton University and Harvard Business School is the first in Thailand to engineer a turnaround at an ailing bank. Banthoon, who built his gleaming headquarters in accordance with the dictates of Chinese feng shui, says the Asia crisis helped him dismantle the old banking order he inherited. It allowed him to redefine traditional client relationships and apply more rigorous standards. He persuaded the family to dilute its holdings to 6% from 17% so the bank could be recapitalized. As a result, Banthoon wrote off nonperforming loans one year ahead of the central bank's December 2000 deadline. The payoff is in the bank's bottom line: a first-quarter profit of $8 million.Return to top
A Chat with Banthoon Lamsam
Banthoon Lamsam is president of Thai Farmers Bank, which rode out the tough years of the Asian financial crisis. This year's first-quarter results make it the first Thai bank to report a profit in three years. He recently spoke with Frederik Balfour, Business Week Asia correspondent. Here are edited excerpts of their conversation:Q: What have these past three years been like for you?
A: We were beaten up a lot by the events, as was everybody. The crisis has taken a toll on those who are still around. We're exhausted, but there is work still ahead.Q: Other banks are still dealing with heavy, nonperforming loans, and some companies are still in denial. How were you able to turn the bank around while others are still flailing?
A: We were not a lender in TPI [Thai Petrochemical Industries, the biggest corporate defaulter in Thailand]. We put the facts on the table, so we knew where the bottom was and how much we had to fill in. We were also lucky to tap capital markets in 1998, tapped into small windows, raising more than 100 billion baht. That enabled us to approach bad assets more aggressively.Q: But you also transferred bad debts to asset-management companies.
A: Transfering to AMCs is not aggressive -- getting somebody to work on them is. Goldman was the underwriter for first equity offering, that was a breakthrough after the crisis.Q: How's their recovery rate been?
A: It's too early to say if it's successful or not successful, the system is there and the team is working on them.Q: What about small and medium-size companies? Are they getting the loans they need?
A: The problem is they got stuck in the middle of the crisis. The crux of the problem is that these companies don't have the capital to begin with, which makes them almost unbankable. This issue hasn't been fully addressed by the government.Q: So what does it take for Thai banks to start lending again?
A: The government thought if you recapitalize the banks, they will lend. But the system is stuck with a huge amount of liquidity and risk aversion. Q: What are banks doing with the excess liquidity?
A: They are putting it in money markets and overseas, but they are making a loss or just breaking even.Q: Aside from recapitalizing, what else have you done at the bank?
A: It was reorganized into a more clarified structure. We brought in Mc Kinsey, Oliver Wyatt, Anderson Consulting -- everybody! We also introduced an early-retirement program to make the organization less fat.Q: Wasn't that hugely unpopular?
A: Yes. Without the crisis, it would be difficult to defend this drastic change of mindset. Early retirement is a voluntary program, but we want to encourage those who cannot compete in the new environment. Some cannot accept new technology, and this is a hard reality. They can't fit into the new business model. In times of crisis, you have to squeeze out performance. You have to be a bad guy if you want to change anything. You end up encroaching on everybody's interests.Q: What's new about your management style?
A: The idea of performance measurement is still ad hoc but has to be done through training and testing. The first thing to attack is a very old and blatant cronyism and nepotism, which is normal in Thai organization. I also need to implement to a high degree the performance culture. People need to accept the inevitability of being measured, the idea of reward and punishment. There's a generational change, people who ran the bank during prosperous times are in their mid-60s and tired. I took over in 1992.Q: Do you ever consider anything other than banking? You're the fourth generation right?
A: I never even considered anything else. I never had the choice.Q: What else are you doing to improve efficiency?
A: New products have to be introduced, and they have to be backed up by a complete overhaul of information technology systems. Marketing and operations are taking a drastic change.Q: What about your traditional clients?
A: Relationships have to be looked at with respect to risk ratings. This puts things in a very different light. When the economy was growing double digits, nothing was risky. It came as a shock to everybody that everything collapsed.Q: What is the bank doing to embrace the New Economy?
A: We are setting up a separate unit, with the help of consultants. In Thailand, it's still in the infant stage. We are moving to centralization of back offices, and more electronic delivery, too. But Thais in general are not into personal computers. The first interface will be ATMs, and the second will be mobile phones.Q: What's the bank's outlook for the rest of the year?
A: We made about $8 million in the first quarter. Unless the economy collapses, we should have a reasonable start. We have fully allocated for loan losses, hopefully that will stay that way.Q: People are now starting to worry about recurring nonperforming loans.
A: Relapsed NPLS are very much an issue in the Thai system. Some loans have been restructured and returned, and there are some new NPLS. Maybe in those parts, the economy not doing so well. Then there are also cases of those who just don't pay.Q: What is the likelihood of more corporate bond issues in 2000?
A: There are very few names good enough to sell to institutions. Thai Farmers bank is a bigger player in underwriting bonds, but there is a very narrow window of risk. Depositers have nowhere else to go, while interest rates are low.Q: Do you think the government has managed the recovery well?
A: Foreign investors are concerned that the management of the country is questionable, more questionable than two years ago when the world thought Thailand had a dream team. There's no other dream team in sight.Q: You have a portrait of Abraham Lincoln on your office wall.
A: Yes. I was 10 years in the States as a student, preschool, Princeton, and Harvard. I bought Abraham Lincoln because he persevered so much.Return to top