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Published on October 27, 2007

Finance Minister Chalongphob Sussangkarn yesterday said a Bt35-billion recapitalisation of TMB Bank would enable the bank to run its business for the next three or four years.

His comment was made after critics said the bank's recapitalisation might not be adequate for further loan-loss provision.

However, Chalongphob warned that after the Bt35-billion capital increase, the next recapitalisation should be done to expand loans and not to solve its financial troubles like this time, he said.

Fitch Ratings yesterday commented that TMB's ratings risked further downgrades if there was a further large loss and prolonged delay in the bank's recapitalisation.

Yesterday, the rating agency placed TMB Bank's rating on "Rating Watch Evolving". The rating action follows the TMB board's announcement last week of its plan to raise Bt35 billion of new equity by the end of the year. This could see the entry of a new strategic shareholder, with ING Bank (AA /F1+) possibly one of the investors.

The Finance Ministry is expected to support the capital raising.

The recapitalisation should help stabilise the bank and its hybrid rating, which was downgraded in January, and could be positive for the bank's overall ratings over the longer term.

The large capital increase and an expected return to profitability next year should permit coupon payments to be renewed on the hybrid securities next year, Fitch said.

Meanwhile, the Bank of Thailand yesterday announced that non-performing loans (NPLs) of financial institutions stood at about Bt260.72 billion in the third quarter, representing 4.44 per cent of total loans, up marginally from 4.41 per cent in the second quarter.

Of total NPLs, Bt258.45 billion were bad loans from banks and represented 4.42 per cent of banks' total loans, up slightly from 4.4 per cent in the second quarter. The rest were NPLs from finance firms and credit fanciers, totalling Bt1.99 billion and Bt282.66 million, respectively.

Banks whose NPLs rose include TMB Bank, with Bt36.33 billion of bad loans representing 7.86 per cent of total third-quarter loans, up from 7.05 per cent in the second quarter.

ThaiBank's NPLs jumped to Bt3.6 billion, 3.62 per cent of total loans, up from 2.87 per cent in the second quarter.

Siam City Bank's NPLs increased to Bt9.53 billion, 3.86 per cent of total loans, up from 1.95 per cent previously.

Kiatnakin Bank's bad loans rose marginally to 10.91 per cent in the third quarter, from 10.41 per cent in the second quarter.

And Land and Houses Retail Bank's NPLs climbed to 1.33 per cent, from 0.91 per cent previously.

It was mostly large banks whose NPLs fell in the third quarter. These were Bangkok Bank, from 3.96 per cent of total loans to 3.9 per cent; Krung Thai Bank, from 7.3 per cent to 6.98 per cent; Kasikornbank, from 3.05 per cent to 2.85 per cent; and Siam Commercial Bank, from 3.84 per cent to 3.61 per cent.

Wichit Chaitrong

 The Nation