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Published on November 16, 2007

The US sub-prime mortgage crisis has dealt a further blow to BankThai. The local bank has reported a reviewed consolidated third-quarter net loss that is Bt206 million higher than that given in an earlier unreviewed financial statement, due mainly to the need to set aside a higher reserve for impairment of its investment in collateralised debt obligations (CDOs).

Announcing the reviewed financial statement in a report to the Stock Exchange of Thailand, BankThai said the additional allowance of Bt206 million was for impairment of investment in CDO Coriolanus Series 39.

This brought its total reserves covering CDOs related to sub-prime debt to $57.9 million (Bt1.96 billion). The figure given in the unreviewed statement and announced last month was $51.9 million.

The reviewed statement said BankThai's consolidated third-quarter net loss was Bt3.04 billion, higher than the Bt2.83 billion reported in the unreviewed statement. This compares with a consolidated net profit of Bt384 million in the same period last year.

"The sub-prime market situation is unstable, and judging from downgradings by credit rating firms like Moody's and Standard and Poor's in October, it continues to deteriorate," The bank said. "For conservative reasons, the bank has therefore provided allowance for impairment of investments for CDO's related to sub-prime [debt] of $57.9 million, or Bt1.96 billion. When taken together with provisions provided in the second quarter, [the total figure] amounts to $65.9 million."

At yesterday's exchange rate, the total figure equals about Bt2.23 billion.

BankThai said that with these provisions, the Bank's CDO's with sub-prime exposure were substantially covered.

As of September 30, the bank's investments in foreign debt instruments included CDOs classified as held to maturity and recorded under cost method amounting to $330 million. Of this, $70 million was invested in CDOs with sub-prime residential mortgage-backed securities, including $50 million in Coriolanus Series 39 and $20 million in Rutland Rated Investment.

The remaining $260 million is invested in CDOs, with underlying assets backed by corporate debts that are considered good. Interest payments are received on schedule, and no credit events or effects on subordination have occurred.

However, once more for conservative reasons, an allowance for impairment of $4.5 million has also been set aside, the bank said. This allowance was included in the unreviewed financial statement.

The Nation