DBS Won't Inject Fresh Funds Into TMB Bank

Source : The Business Times, September 15, 2007

It says it hasn't got adequate assurance on its role in the Thai lender's future

Committed shareholder: DBS says it expects its current 16.1 per cent stake in TMB to be diluted but it 'remains committed as a significant shareholder' of Thailand's fifth-largest commercial bank

DBS Bank has confirmed it will not inject new funds into Thailand's TMB Bank, after failing to get sufficient management control of the ailing lender.

In a statement last night, DBS, which owns 16.1 per cent of TMB, said it had not received 'adequate assurance' on its role in the bank's future.

This was despite 'several months of extensive discussions' with TMB's management and board, and the bank's largest shareholder, the Thai Finance Ministry, which owns a 31 per cent stake.

As a result, 'DBS does not intend to participate in the proposed recapitalisation plan of TMB'.

TMB has been trying to raise some 35 billion baht (S$1.66 billion) in new capital from existing and new investors for bad loan provisioning.

DBS said it expects its current 16.1 per cent stake in TMB to be diluted but added that it 'remains committed as a significant shareholder of TMB'.

DBS chief financial officer Jeanette Wong said: 'Our decision was not an easy one as we spent many months exploring ways in which DBS could help TMB.

'Unfortunately we did not receive adequate assurance that we would have sufficient management control to effect the business and operational changes necessary to improve TMB's performance.'

In July, DBS took a $159 million charge against its second-quarter net earnings to reflect a fall of more than 30 per cent in the market value of its stake in TMB since late 2004.

DBS chief executive Jackson Tai said at the time he was disappointed with TMB's results.

That same month, TMB had turned in a quarterly net loss of 6.13 billion baht caused by massive bad loan provisions, reversing a net profit of 1.2 billion baht a year earlier and 220 million baht in the first quarter.

The fifth-largest commercial bank in Thailand, TMB has been criticised by the Thai Finance Ministry for lax lending practices.

Both DBS and the Thai Finance Ministry had pushed for a change in TMB's management as a condition of their injecting fresh capital into the bank, forcing TMB to delay its 35 billion baht rights issue initially planned for July.

It now seems the talks were not enough to convince DBS to pump in more money. But DBS said yesterday that Thailand remains an important market in Asia and said it would 'continue to look for opportunities to grow its footprint in Asia'.

Last month, Thai newspaper Khao Hun reported that Dutch banking group ING was in talks with TMB to buy a 24.9 per cent stake in the bank, fuelling talk that ING might replace DBS as TMB's second-largest shareholder.

Last week, DBS said it was 'too premature to comment' on the matter, which had yet to be finalised.

DBS acquired its stake in TMB when it was formed in 2004 from the merger of DBS Thai Danu, Thai Military Bank and the Industrial Finance Corp of Thailand.

Since the start of the third quarter in July, TMB's shares have lost another 19 per cent. They last traded at 1.84 baht yesterday.