BAY banks on double-digit growth from global markets

Bank of Ayudhya (BAY) is aiming for double-digit growth in revenue from its global markets business in 2017 despite missing its growth target this year because of a slow world economy.

Higher outbound and inbound investment demand in Thailand from local, Japanese and multinational corporates after the formation of the Asean Economic Community at year-end should support the bank’s business expansion, said Tak Bunnag, first executive vice-president and head of global markets.

BAY’s strategic partnership with Mitsubishi UFJ Financial Group (MUFG), Japan’s biggest and one of the world’s largest financial institutions, has transformed the Thai bank from a treasury unit that provides cash management and foreign exchange to a global markets group since the beginning of this year.

The bank, which is 76.88% owned by MUFG, expects its global markets business growth to reach 6% this year, below the target of 8%. Sluggish business activity because of a weak global economy slowed its global markets expansion.

Financial services under the bank’s global markets group span from foreign exchange, derivatives and balance sheet hedging to strategic investment. Foreign exchange hedging should see strong demand next year from both local and overseas customers because of more volatile money markets across the globe. The US Federal Reserve’s first rate rise in almost nine months is expected next week, leading to high capital mobility and fluctuation in foreign exchange markets.

BAY hopes more business operators will use hedging to guard against such volatility. The country’s fifth-largest commercial lender by assets has forecast baht volatility of 7-8% next year compared with 6.15% this year.

For the first nine months of 2015, the bank’s non-interest and fee income increased by 1.19 billion baht or 21.8%, driven largely by higher gains on trading and foreign exchange transactions.

Funding mobilisation for regional business operators through baht bonds is expected to raise demand because of project investment in neighbouring countries, said Mr Tak.

BAY’s shares closed on the SET on Friday at 30.75 baht, down 50 satang, in trade worth 9.23 million baht.