Sommai orders probe into TMB Bank losses

Deputy Finance Minister Sommai Phasee said yesterday that if any wrongdoing were uncovered during the investigation, then all management and directors - including him - would be subject to legal action.

Sommai was the bank's chairman before his ministerial appointment late last year.

"Shareholders, both major and retail, should be told why the bank has this big loss, despite its recapitalisation. The probe will be an in-depth examination tracing back in particular its capital status and earnings," he said.

"There must be probe into whether there is fraud in lending. If there is any wrongdoing, legal action must be taken against both board members and management. If any wrongdoing is found during my period [as chairman], then I too should be made to take legal blame."

Several parties have questioned why the Finance Ministry, as one of the major shareholders, injected more funds into the commercial bank during last year's recapitalisation, but the bank is still bleeding. The ministry now holds about 30 per cent of TMB Bank.

The fifth-largest bank showed retained losses of Bt60.18 billion last quarter after reporting a net loss of Bt12.29 billion last year, following a net profit of Bt7.8 billion in 2005.

In this year's first quarter, it posted a net profit of Bt220.17 million against Bt2.13 billion in the same period last year. The poor showing could be ascribed to a Bt1.21-billion provision taken to comply with International Accounting Standard 39 and a slight narrowing of its net interest margin to 2.26 per cent from 2.27 per cent last year.

Subhak Siwaraksa, the bank's president, reacted to Sommai's statement by saying that while there could be fraud at some branches, this was matter for the bank to oversee.

"But saying such a thing [Sommai's statement] will be damaging to both the organisation and its personnel. I just wonder why he didn't say such a thing when he was here [TMB]," said Subhak.

TMB Bank last year raised Bt9.7 billion by issuing new shares to existing shareholders and floating hybrid securities worth US$200 million (about Bt7.9 billion at that time).

Sommai noted that TMB Bank was treated differently from Krung Thai Bank, which is examined in line with all state enterprises. If any executive or employee of TMB Bank has done something wrong, he or she would be punished or even imprisoned, he said.

Finance Minister Chalongphob Sussangkarn said he had not yet been informed about Sommai's intention to investigate TMB Bank.

TMB Bank has recently been bombarded by bad news aside from its high retained losses.

The Bank of Thailand barred the bank from making July's coupon payment on its US$200-million (Bt6.91 billion) hybrid Tier-1 securities, citing the bank's retained losses.

Moody's Investors Service downgraded the bank's hybrid rating from Baa2 to B1 on concerns that the bank would not pay interest on its hybrid securities.

Standard & Poor's yesterday cut its ratings outlook for the bank to negative due to uncertainties over its recapitalisation plan. The international credit agency said the outlook downgrade implied there was at least a one-in-three possibility that the bank's ratings would be lowered in the intermediate term.

And the banks' major shareholders were rumoured as discussing a change in the bank's president and a decision would be made before the bank launches its new capital-increase mission.

TMB Bank is expected to mobilise Bt35 billion in fresh funds by issuing new shares to existing shareholders. The proceeds would be used to strengthen the bank's capital adequacy ratio, which stood at 10.58 per cent of risk-weighted assets as of March.

The Finance Ministry's stake is expected to be diluted to 25 per cent, as it does not plan to exercise all its rights to subscribe to the capital-increase shares.

Somruedi Banchongduang

The Nation