DBS Role In Thai Bank May Shrink

Source : The Business Times, August 24, 2007

Dutch bank ING could replace it as TMB's second largest shareholder

DUTCH bank ING is set to replace Singapore's DBS Group as the second-largest shareholder in TMB Bank, Thai media reported yesterday.

ING, which has for several years been looking to acquire a Thai banking asset, has agreed to buy a 24.9 per cent stake in TMB, Thailand's sixth-largest commercial bank in terms of asset size, according to a Khao Hun news report.

The report helped push the share price of TMB higher as investors have become more optimistic about the nearly US$1 billion of recapitalisation at the bank, which is seeking to clear up its bad loans ahead of stricter Bank of Thailand rules coming in next year.

Khao Hun, which cited sources in the Ministry of Finance, said that on Aug 17, senior management of TMB took representatives of ING to meet Finance Minister Chalongphob Sussangkarn, introducing them as potential shareholders.

The paper said that ING's planned 24.9 per cent share in TMB would make it a bigger shareholder than Singapore's DBS, which currently holds 16 per cent and is the second-largest shareholder after the Ministry of Finance itself, which has 31 per cent.

TMB has been trying to raise close to 35 billion baht (S$1.65 billion) in new capital to meet its bad loan provisioning requirements - but DBS is said to want a change in management before it would inject more funds.

Reports have suggested that DBS, Singapore's biggest bank, said that it was reviewing whether to take part in the recapitalisation plan.

'We share with others the disappointment in the results of TMB,' DBS vice-chairman and chief executive officer Jackson Tai was quoted as saying.

TMB on its part expects its loan book to be reduced by 40 billion baht this year as a result of loan write-offs and distressed asset sales.

Subhak Siwaraksa, TMB chief executive officer and president, has said that outstanding loans fell by over 10 per cent in the first half as a result of loan repayments by corporate customers and small businesses as well as bad debt write-offs.

TMB's outstanding loans stood at 448 billion baht at the end of May, down by 12.45 per cent from the beginning of the year. Non-performing loans as at March stood at 30.88 billion baht, or 6 per cent of total loans.

Mr Subhak said that the bank's current capital adequacy level of 10 per cent of risk assets was sufficient to cover business activities through the end of the year.

TMB needs to further increase its capital after posting a loss of 12.3 billion baht in 2006, as it sets aside more provisions to cover possible bad loans.

TMB was formed by the merger of Thai Military Bank, DBS Thai Danu Bank and Industrial Finance Corp of Thailand in September 2004. The merged entity overestimated asset quality and was not strict enough on bad loan policies, Sorasit Soontornkes, a senior director at the Bank of Thailand, said in a recent interview.

DBS bought Thai Danu in 1997 at the beginning of a regional acquisition spree aimed at making it South-east Asia's premier lender. DBS put aside $1.06 billion in 1999 for bad loans, with almost three-quarters of that amount for the Thai bank.