SCB may be forced to raise deposits if LDR goes up further

Market watchers believe that if SCB has to transfer the Shinawatra family's accounts from its deposits, it might need to aggressively raise funds to keep its liquidity stable. This could lead to another round of inter¬estrate war among banks for time deposits.

SCB, which holds the largest por¬tion of the Shinawatra family accounts totalling Bt39.63 billion, earlier received a letter from the Revenue Department that ordered the bank to transfer the accounts of Thaksin's children for tax payment. However, as the deposits have been frozen under orders from the nowdefunct Assets Examination Committee (AEC), the bank is seek¬ing a ruling from the Administrative Court.

"In the worstcase scenario, this could raise SCB's already high LDR and add to margin pressure. The impact of such frozen deposits on the other banks is not significant," according to Citi Investment Research.

Citi said the worst case would be if the entire Bt39.63 billion of deposits were taken out of SCB. This could put further pressure on the bank's liquidity. As of June 2008, its LDR was 101 per cent and loantodepositplusborrowings ratio was 92 per cent.

"If we adjust Bt39.63 billion, the bank's LDR would jump to 105.8 per cent and loan/depositplusborrow¬ings ratio would be 96 per cent," Citi Investment Research said.

Impact on other banks is mini¬mal.

Of the Bt88.4 billion in frozen deposits, Bt18.16 billion was deposited with Bangkok Bank, or 1.4 per cent of the bank's deposits. Assuming the worstcase scenario for Bangkok Bank, its LDR would marginally rise from 92 per cent at the end of the second quarter to 93 per cent, while its loantodepositplusborrowings ratio would increase from 87 per cent to 88 per cent.

For the other banks, as the amount of deposits is not significant, their impact on the banks' liquidity would be minimal.

The Revenue Department has claimed that Panthongtae and Pinthongta Shinawatra owe it Bt12 billion in unpaid tax from the sale of Shin Corp shares in January 2006.

Thaksin Shinawatra's children have been accused of evading tax payments for their estimated earn¬ings of Bt15 billion from the Shin Corp deal in 2006. Since they have not paid Bt12 billion in tax, the Revenue Department is seeking a transfer of Bt12 billion from the Shinawatra siblings' accounts at SCB.

The Shinawatra family has deposited Bt39.63 billion with SCB, accounting for 4.53 per cent of the bank's deposits. According to Thai laws, unless the court orders other¬wise, the assets must remain frozen until the final verdict is reached, which could take years, Citi Investment Research said.

In total, Shinawatra deposits of Bt88.4 billion with 12 Thai banks have been frozen. These include accounts at SCB, Bangkok Bank, Bank of Ayudhya, Thanachart, Kasikornbank, TMB Bank, Siam City Bank, United Overseas Bank (Thai), Government Savings Bank, Government Housing bank, Islamic Bank and Bank for Agriculture and Agricultural Cooperatives.

SCB was ranked number three in terms of market share of deposits. As of July 2008, its market share was at 14.46 per cent. Its total deposits of Bt874.83 billion rose Bt1.73 billion or 0.2 per cent from June 2008 and up Bt84.1 billion or 10.64 per cent from the same period last year. The bank has recorded an increase in deposits of Bt25.5 billion this year.

Total deposits in Thai commercial banks as of July 2008 amounted to Bt6.05 trillion, up Bt28.53 billion or 0.47 per cent from June 2008 but down 0.85 per cent from the same period last year.

The rising deposits in July for large banks were led by Krung Thai Bank, whose deposits jumped Bt33.93 billion in the month, fol¬lowed by Kasikornbank and SCB, whose deposits rose Bt7.08 billion and Bt1.73 billion, respectively.

In July, Krung Thai Bank partic¬ipated in the Thailand Confidence Fair held by the Finance Ministry, offering very aggressive and com¬petitive deposit returns of 6 per cent for threemonth deposits.