SOCIETE GENERALE: Several major finance houses are looking to life after the crisis as 'quasi-banks' offering a wide range of services

SG Asia Credit Ltd, with Societe Generale of France as its major shareholder, plans a major capital increase soon to support its bid for a "super-finance" company licence.

‘Our new capital must be enough to last through 2000. We don’t want to recapitalise every six months. We have to discuss it with our partners and, once we have done that, we will decide on the amount’
JAQUES BOUCHERY
South Asia division chief

The company is one of two, the other being National Finance, awaiting a final policy from industry regulators who are looking placing the super-finance concept with a! of licences for restricted banks.

Under the proposal, restricted bank licences would be offered for five or more finance firms or credit fonciers merging together. Minimum paid-up capital to qualify for the new licence would be 15 billion baht.

After five years, restricted banks would be allowed to establish cheque-clearing systems, essentially becoming commercial banks.

The super-finance concept was initiated last year to encourage consolidation of the finance sector. Like restricted banks, super-finance firms would be allowed to offer services traditionally reserved for commercial banks, although restrictions on certain retail accounts and branch networks would be maintained.

The restricted bank concept "is better than the [super-finance licence] because firms will be able to borrow at a lower rate with a banking licence," Bank of Thailand governor M.R. Chatumongol Sonakul said recently.

SG Asia Credit, known as SGACL, was acquired by Societe Generale in March when the
parent company increased its stake from 25 % to 51%. Bangkok Bank, which previously held 8%, increased its stake to 39%.

SG says it bought into Asia Credit Ltd (ACL) in 1983 at the market price. A combination of rights issues and private placements raised Asia Credit's registered capital from 765 million baht to 6.9 billion baht.

The company plans to increase capital again to strengthen itself against any further deterioration' of the economy.

SGACL is also separating its securities and finance businesses, a prerequisite for obtaining a super-finance licence. The new securities firm will be called Societe Generale Asia Credit Securities, in which the finance side of SGACL would hold 99.99%.

SGACL now has an asset base of 49 billion baht, well above the 40 billion required to attain super-finance status, said Jacques Bouchery, head of Societe Generale's South Asia division and chief executive of the Thai branch.

Under the super-finance umbrella, SGACL would operate like a bank, providing all services except chequing accounts. The company would become what Mr Bouchery calls a "quasi bank" with the advantage of a securities subsidiary.

He said that in making SGACL the market leader, all SG operations (international banking facilities, SG Securities Asia and SGACL) would come under one roof for easier management. SGACL would focus more on corporate clients, where it had wide expertise, rather than the retail sector.

He said he had no regrets about making the decision to step up the company's presence in Thailand because the investment was long-term.

"I don't think I made a mistake by entering the market so soon. Our investment is long-term and we still have a lot of faith in the Thai market."

He conceded that loans arrears in the finance sec-tor had increased since the parent company made its decision, but SG's posi-tion was known at the time.

SGACL had experienced a "fair share" of the deterioration of the finance industry, he said.

But there were long-term attractions includ-ing Thailand's huge industrial base. Mr Bouchery said Thailand, would become an industrial power if the right measures were taken, and therefore SG felt it was important to be present in the country. But Thailand also needs to improve worker skills and productivity while keeping costs low.

"The country has great potential to get back on the track but it has to go through the crisis first to restructure the economy. There is a willingness by the government to reform the economy, change the structure and make it more competitive."

There was much scope for improving education, currently divided between a high level for the elite and and a low level for the rest. "We should take advantage of this crisis to teach people, for our industry's employ-ees should know foreign languages, marketing techniques and credit analysis."

Thai people were willing to learn, he said. "We are offering all this training to our staff."
Rather than branching out in the current cli-mate, SGACL would introduce new products such as derivatives and trade finance. Mutual benefit would be derived from Bangkok Bank's involvement.

There were no plans for the parent company tobuyoutSGACL100%,asitwantedthefirm to remain listed.

"We plan to boost capital. Worsening non-performing loans have forced us. We are in dis-cussion with Bangkok Bank and have not come to a point where the bank might decide to walk away," Mr Bouchery said.

"Our new capital must be enough to last through 2000. We don't want to recapitalise every six months. We have to discuss it with our partners and, once we have done that, we will decide on the amount."

Once SGACL had acquired super-finance status, it would decide which products it wanted to introduce in Thailand. Prime targets would be multinationals and other large corporations, but the current portfolio of smaller Thai firms would continue to serviced.

Looking to the future, Mr Bouchery said: "There will be no room for finance companies in a few years. It will be either super-finance firms or banks."

Societe Generate
Established in Thailand: 1976 as a representative office, upgraded to BIBF in 1993
Major shareholders: Societe Generate for BIBF and SGACL, Bangkok Bank for SGACL
Registered capital: 6.92 billion baht (SGACL)
Main businesses: Banking (BIBF), securities and financing
Subsidiaries: SG BIBF, SG Asia Credit Plc (SGACL)
Number of employees: 20 (BIBF), 500 (SGACL)
Total assets: 25.84 billion baht (BIBF), 41 billion baht (SGACL)
1997 gross revenue: 3.5 billion baht (SGACL)
1997 net profit: 36.5 million baht

Worldwide
Headquarters: Paris
Number of countries: 80
Number of employees: 55,000
1997 gross revenue: 55.06 billlion Francs
1997 net profit: 6.11 billion Francs