Siam Commercial Bank plans to issue floating-rate debentures in its first foreign fund-raising since the 1997 financial crisis.

Proceeds from the US$150-million (Bt5.9 billion) offer will refinance the bank’s US dollar-denominated subordinated debts, due next month.  

Details of the bonds – including their maturity, coupon rates and timing – are not yet available.

“The bank’s foreign currency liabilities have been gradually redeemed as we, like other Thai banks, have not raised overseas funds for a long time since the crisis,” said a source at the bank.

The previous overseas fund-raising by the country’s fourth-largest bank dates back to 1996.

The source said that SCB’s foreign assets were substantial and its foreign liabilities relatively low. Therefore, it wants to issue foreign bonds to match its foreign assets. Although one overseas market – the United States – yields higher funds than domestic deposits, the bank is only aiming to diversify its funding sources, he said.

Fund-raising in a foreign currency will also help it prepare for overseas expansion, he added.

An analyst, speaking on condition of anonymity, said it was possible SCB would use the funds for foreign banking business, particularly in China. Last year, it signed a memorandum of understanding with China’s Exim Bank for cooperation for bilateral cooperation.

Now is a good time for SCB to offer foreign-currency bonds as the Kingdom's economic fundamentals are in good shape and the bank last year performed better than in 2004.

A source in the banking industry said the coupon rate of the debentures was expected to be based on the London Interbank Offering Rate, which stands at 5 per cent.

“Once the bank raises funds in a foreign market, the competition for deposits among the country’s larger banks will lessen but the competition among the smaller banks will continue to be keen,” he said.

SCB recently announced a record high annual net profit of Bt18.88 billion for 2005, having posted Bt18.48 billion the previous year.

The bank seeks to expand both its deposits and lending by Bt50 billion each this year.

Meanwhile, the Bank of Ayudhya’s executive vice-president, Tak Bunnag, said his institution did not consider foreign funds necessary as it would not benefit from them.

As the bank has only two foreign branches – in Hong Kong and Laos – raising funds in dollars would not help it save on funding costs.

The Bank of Ayudhya will be able to raise more funds from the conversion of its remaining 1.22 billion warrant units into common shares.

Somruedi Banchongduang

The Nation