Bangkok Commercial Asset Management (BAM) expects to receive this year's first tranche of non-performing assets (NPAs) worth Bt30 billion from commercial banks following the signing of an agreement yesterday between the state-owned asset-management firm and the Thai Bankers' Association.

At present, BAM has 11,655 NPAs under management, valued at a total of Bt38.78 billion, or 22.05 per cent of the Kingdom's total bad assets. Overall banking-industry NPAs are valued at Bt175.87 billion.

Interim Deputy Prime Minister and Finance Minister MR Pridiyathorn Devakula chaired yesterday's agreement-signing ceremony. He said the sale of banks' NPAs to BAM would help clean up the balance sheet of the country's financial institutions.

"The issue of selling off banks' NPAs to Asset Management Corp has been talked about for three years. This is my initiative, with a target of cleaning up banks' bad debts and strengthening the country's banking industry," he said.

Pridiyathorn said the Bank of Thailand's recently established target of reducing non-performing loans (NPLs) in the banking industry to 2 per cent of total loans by the end of next year remained unchanged.

He said the official objective was to keep BAM as a permanent organisation for receiving and managing banks' bad assets and bad loans. Detailed guidelines on the sale of non-performing loans to BAM are still under consideration, but in the future there should be other asset-management companies competing with BAM. One company, Sukhumvit Asset Management, might be developed as a BAM rival. Its major shareholder is Krung Thai Bank, the Kingdom's largest state-owned bank.

Thai Bankers' Association chairman Jada Wattanasiritham said selling prices for NPAs depended on their quality, which was divided into four categories. Discount rates are thus ranked 18-33 per cent of appraised prices, with a payment period of between two and nine years. BAM pays for the banks' assets with zero-coupon bonds.

A formula for selling banks' NPLs to BAM is expected to be ready by the end of this year. It will be based on the formula for selling NPAs.

Bangkok Bank senior vice president Suvarn Thansathit said his bank, which holds bad assets worth about Bt40 billion, planned to sell Bt1 billion worth of NPAs to BAM before the end of the year. It also plans to reduce its NPLs to a single-digit percentage of total loans this year, from more than 10 per cent at present.

Kasikornbank and its asset-management company, Phethai Ltd, plans to sell Bt4.4 billion worth of NPAs to BAM, and Bank of Ayudhya will sell Bt1.8 billion worth to BAM, with the objective of cutting its bad assets to a value of about Bt11 billion by year-end.

Somruedi Banchongduang

The Nation