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Bad assets balloon in first quarter

But syndicated project loans are projected to grow sharply next year

Published on July 7, 2007

Bankers believe syndicated project loans, particularly for independent power plants, will increase sharply next year as the economy moves down the recovery road.

But banks saw their bad assets, especially consumer, real-estate and agricultural loans, balloon in the first quarter, according to Bank of Thailand statistics.

David Gardner, managing director for Asia-Pacific at Hongkong and Shanghai Banking (HSBC), said the economy would revive and grow stronger on solid fundamentals. The country's investment and overall lending will pick up, as will syndicated loans.

Besides independent power plants, the mega projects, mainly for transport infrastructure, that are scheduled to start next year will also possibly need syndicated financing. HSBC is interested in taking part in these projects, Gardner said.

Offshore banks in general are keen on lending to all kinds of industries, but preferably petrochemical, energy and power, which are infrastructure sectors that still face high demand, he said.

Yesterday, nine banks signed a loan deal for US$475 million (Bt16.15 billion) with HMC Polymers, a subsidiary of PTT, to fund its petrochemical plant expansion. Five foreign and four local banks were involved.

"The syndicated loan granted to HMC may be the largest deal in terms of loan amount for the country this year. And it's possible it will to lead to more syndicated project finance in the country," Gardner said.

Khanit See, executive vice president at Bangkok Bank, said syndicated loans, which had been sluggish for a long time, would resume next year, assuming that economic growth gained momentum, which would pull in investment.

For example, there is the massive expansion plan of PTT Polyethylene, another PTT unit, which is expected to need Bt200 billion-Bt300 billion in capital over the next few years. That is expected to require bank loans of Bt32 billion.

Saranthorn Chutima, executive vice president of Siam Commercial Bank, said syndicated loans reflected greater investment as well as a positive economic outlook. Signs that the economy is on the mend will give confidence to banks in extending huge credits.

But the agricultural, property and consumer sectors have shown a gloomier picture of debt repayment. with non-performing loans (NPLs) accelerating in the first quarter.

The agriculture industry experienced a jump of Bt6.49 billion in NPLs in the first quarter, compared to a Bt1.12 billion bulge in the previous quarter. Of the total increase in NPLs, Bt5.53 billion were new NPLs, while the rest were re-entry NPls. That was significantly higher than the Bt780 million in new NPLs posted in the fourth quarter of last year.

The property industry's NPLs were up by Bt5.35 billion in the first quarter, slightly higher than the Bt5.26 billion increase in the previous quarter. Re-entry NPLs surged by Bt2.42 billion, compared with Bt1.64 billion in the fourth quarter.

Bad consumer loans increased by Bt11.69 billion, compared with Bt10.12 billion in the fourth quarter. Of the total new NPLs, re-entry NPLs were Bt2.5 billion, up from Bt1.86 billion, while new NPLs were again high, at Bt7.45 billion.

Anoma Srisukkasem,

Somruedi Banchongduang

The Nation


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