The rating agency noted that the imminent transactions will boost TMB's regulatory capital to a level comparable to other large banks in Thailand. More importantly, the bank's economic capital (adjusted for possible additional loan losses) will increase to a moderate level, supporting the recovery in loan demand in Thailand.

According to TMB Bank's website, its  financial strength rating was E-plus in November last year.

"Moody's review will focus on the success of TMB's proposed rights issue and hybrid securities offer," Wah said. "Given that the possible hike in economic capital will be contributed mainly by the rights issue, a possible upgrade of its bank financial strength rating will hinge primarily on a successful rights issue.

"With TMB's financials still being weak despite the gradual improvement, Moody's will hold TMB to a higher economic capital level relative to banks with a financial strength rating of D-minus in other countries, until its fundamentals show substantial progression."

Moody's also said it is maintaining a stable outlook on TMB's debt and deposit ratings because the potential for support from shareholders is already adequately reflected in the ratings. This level of support is not expected to change in the foreseeable future.

TMB had total assets of Bt717 billion at the end of 2005. The Thai military's stake in the bank has fallen significantly since the 1997 financial crisis and it currently stands at about 5 per cent. The Finance Ministry is the largest shareholder with 31.2 per cent. Singapore's DBS Bank holds 16.1 per cent.