The KTB-GULF-ADVANC-OR, SEA-BBL-VGI-Thailand Post and SCB-WeBank-KakaoBank consortiums are the applicants most likely to win one of the Bank of Thailand's virtual bank (VB) licences given their strengths in terms of capital, technology and a large customer base, says Yuanta Securities.
Yuanta expects these groups, whose members include Thai commercial banks, have a greater chance of winning a VB licence. These groups possess customer data, enabling their prospective operations to meet the needs of the central bank.
The group comprising Krungthai Bank (KTB), Gulf Energy Development (GULF), Advanced Info Service (ADVANC) and PTT Oil and Retail Business (OR) has a strong customer base and customer data, including users of AIS's mobile network, members of KTB's Pao Tang application, along with the members of OR's Blue Card programme.
In addition, the group has partnered with Gulf Energy Development (GULF), whose businesses relate to cloud computing and digital assets, both of which support the operation of a virtual bank.
The alliance of Bangkok Bank (BBL), VGI and Thailand Post is interesting because it has partnered with SEA Group (Singapore), which is a service provider in the form of the Shopee e-commerce and Garena gaming platforms.
Shopee's large market place represents is a key strength for a virtual bank because it has data of both consumers and sellers of products.
Moreover, Thailand Post possesses a strength in terms of distribution channels and offline customer access. These provide the group with the opportunity to expand into an omnichannel service channel in the future, Yuanta said in a report.
Although its application has yet to be confirmed, the consortium grouping Siam Commercial Bank (SCB), WeBank and KakaoBank possesses a large quantity of underbanked customer data (of SCB), supported by the know-how of the other two members who have each operated a virtual bank, which have been successful in South Korea and China, respectively.
The two other applicants for a VB licence, according to Yuanta, are the Lightnet Group-WeLab alliance and CP-ASCEND group.
Lightnet is a large fintech company with expertise in AI and blockchain, as well as being in a business related to global payment solutions, while WeLab is a large virtual bank operator in Hong Kong and Indonesia, with a customer base of roughly 65 million across Asia.
"Yuanta expects the successful applicants for VB licences in the first round will be the groups of KTB-ADVANC-OR, SEA-BBL-VGI-Thailand Post and SCB-WeBank-KakaoBank because these groups have the complete components of capital, technology and a large customer base, which provides them with customer data, all of which help their [prospective] VB operations to meet the central bank's demand for financial participation of the underbanked group," said the brokerage.
Having Thai commercial banks in the consortiums benefit them with their experience and understanding of banking operations under the supervision of the central bank and minimise the chance of issuing financial products that create negative and unsustainable impact in the market such as loans with interest rates that are too low or too high, it added.
According to Yuanta, the winning virtual bank licence applicants will be announced on June 19 next year and they will have one year to prepare for the roll out of service. Therefore, by June 19, 2026, Thai virtual banks would formally commence their operations.
In the first 2-3 years, each virtual bank will be in a so-called "phasing" period, which will be strictly supervised by the central bank in terms of providing services, product issuance, data security and the loan approval process.
"Business expansion during this period will be quite limited. Thus, Yuanta believes the profits banks would receive from the virtual banks will be quite limited or even be running at a loss until their virtual bank operations pass the Bank of Thailand's criteria within the next three years."
After that, banks would start to see more positive results from the virtual banks in terms of net interest margin (NIM), which would be higher than the bank's original loans and fee income, Yuanta noted.
"Virtual banks are positive for the long term but in the short term, they will create a slight financial burden for banks during the preparation and initial establishment of the virtual bank," it said in a research note.
Banking stocks participating in virtual banking, namely KTB, SCB and BBL, are expected to benefit in the long term from expanding their customer base to the underbanked group and have the opportunity to sell other financial products to virtual bank customers.
However, in the short term, there is expected to be pressure from slightly higher investment costs and a share of losses from virtual banking, the research noted.
Banking stocks that do not operate virtual banking operations but which have related businesses, such as Kasikornbank (KBANK) and TMBThanachart Bank (TTB), are expected to see increased investment costs in technology in order to develop a digital platform to stay competitive with the virtual banks.
Meanwhile, Tisco Bank (TISCO) and Kiatnakin Phatra Bank (KKP) would realise a limited impact because they don't have businesses that overlap with virtual banks, said Yuanta.
"Finance stocks which provide consumer loans, including Krungthai Card [KTC] and Aeon Thana Sinsap Thailand [AEONTS] will also be under pressure as some of their customers might turn to virtual banks, which are expected to offer unsecured loans."
Yuanta still put "neutral investment weight" on banking stocks due to limited interest income growth, both from stricter new lending requirements and lower NIM amid a trend of interest rate decline.
Banks, however, are still being recommended because they are dividend stocks with an interesting dividend yield, the research noted.
