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Nic Dunlop for Asiaweek.
Pornsanong wished he had acted earlier.

What We Learned from Singapore
Thanks to DBS Bank, Thai Danu Bank has gotten a fresh start

Pornsanong Tuchinda vividly remembers the day in 1998 when DBS Bank CEO John Olds came to visit Bangkok. The Singapore group had bought 70% of Thai Danu Bank, which like other institutions in Thailand was burdened by non-performing loans. "He beat me up a bit, a lot actually," laughs 39-year-old Pornsanong, who is president of the renamed DBS Thai Danu Bank. "He said: 'Pornsanong, you are young, don't think like a commercial banker. Thailand is in a meltdown. Some of this money you will never recover. You must take a haircut.'" Pornsanong argued back, but Olds eventually got his way. Last month, DBS Thai Danu sold 30.9 billion baht ($756.8 million) in bad debt at 29 cents to the dollar.

The young president, who used to work with Citibank, is no longer arguing against write-downs. "I wished we had done it at the beginning," he says. "We would have been out of the woods faster." Thai Danu took a loss of $284 million on the transaction — equal to 75% of the $367 million DBS Bank had injected to strengthen its acquisition's capital base. But the sale brought down Thai Danu's non-performing loan ratio to 10%, from 60% before the takeover. International rating agency Fitch IBCA estimates that its capital-adequacy ratio will rise to 16%, the strongest of all Thai banks. "We are ready to move on," says Pornsanong. "We are two years ahead of the competition."

Maybe. "DBS Thai Danu is quite a good quality bank right now," says Kawee Chukijkasem of Capital Nomura Securities. "But the problem of any hybrid bank is how to expand. They have a small branch network. Customers in Thailand are not like customers in America who are familiar with new technologies and products. Thai customers need educating." Last year, Thai Danu's assets fell 19% to $2.9 billion. It is ranked No. 324 in the 2000 Asiaweek Financial 500, down 44 notches from 1999. After closing 35 branches and letting go of 1,350 people, Thai Danu now has 61 offices and 1,850 staff, much leaner than big local players like Bangkok Bank (No. 74) and Thai Farmers Bank (No. 112).

It's not easy being acquired. DBS Bank had long-standing business ties with Thai Danu, but that is different from having the Singapore bank as the majority owner. "DBS is sensitive, but it means business," says Pornsanong. The staff firings were painful — and swift. "You make such major cuts over time or you do it straightaway," says Pornsanong. "I believe it is better to take the pain at once. We did it fairly, every level from myself down. I could have been axed." The leaner operation means individuals have more responsibilities. Pornsanong himself has taken on line duties for retail banking after the departure of executive vice president Chaiwat Utaiwan, who left to become CEO of AIG Finance in Bangkok.

A number of key posts are now occupied by DBS-appointed Singaporean and Western executives. "Sometimes there is tension," Pornsanong admits, "but we try to make [the arguments] productive." DBS has been careful to retain a Thai at the helm, which analysts say is wise for face and continuity. "On the people side we are ready, on the process side we are ready, and on the technology side, by next year we will be moving onto the DBS regional platform," says Pornsanong. "One day consumers and corporates are going to wake up and find they are banking with someone relying on a survival strategy with no ability to accommodate future customer needs. At that point we can take market share." And discover the real benefits of being acquired.

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