Since the financial crisis of 1997, GSB has expanded into retail, residential property and commercial and infrastructure lending businesses. About half its lending is to consumers and private enterprises, while the rest is to government agencies and state enterprises to fund government economic development and social welfare projects.

Mortgage loans made up 30 per cent of its loan book in 2005 (up from 17 per cent in 2000), while local community loans accounted for 28 per cent.

GSB has supported the government's policy to develop the grass-roots economy, aimed at reducing poverty and creating more opportunities for low-income individuals, according to Fitch's statement.

The bank's operating results improved in 2005, with net income rising to Bt12.3 billion from Bt11.9 billion in 2004, mainly due to loan growth and lower funding costs. The net interest margin also rose to 3.3 per cent from 3.1 per cent in 2004.

With improved net interest income, reduced personnel expenses and the absence of substantial investment losses in 2004, GSB's cost-to-income ratio improved to 38.1 per cent in 2005 from 47 per cent in 2004. This is lower than that of many other Thai banks, mainly due to GSB's limited investment in technology.

GSB also expects to expand the scope of its banking activities. It has been in the process of restructuring and strengthening its workforce through a series of early-retirement programmes, new hiring and intensive training courses.

Its management team has a long-term plan to expand GSB's fee-based activities to increase the proportion of fee income to about 20 per cent of total income from 4.5 per cent in 2005.

At the end of 2005, loan-loss reserves amounted to Bt11.6 billion, or 81.2 per cent of reported impaired loans, which rose to Bt14.3 billion or 3.8 per cent of total loans in 2005. While reserve coverage appears strong, GSB's support of government policies and its expanding loan activity beyond its previously restricted lending scope may lead to a deterioration in asset quality in the medium term, particularly given the weakening economy.

GSB's total capital ratio, which stood at 25.5 per cent of risk-weighted assets at the end of 2005, is very strong. Its equity, Bt79.3 billion, also appears solid at around 11.7 per cent of total assets. A large portion of the bank's assets are government debt securities.