Among the large banks, only two - Siam Commercial Bank (SCB) and Kasikornbank  - managed to reach their loan growth targets for 2006, of 10 per cent and 6 per cent, respectively.

Most big banks recorded lower net profit growth in the third quarter, compared with the corresponding period a year earlier.

Only Krung Thai Bank (KTB) and Bank of Ayudhya (BAY) showed improving results in the quarter. KTB posted net profit of Bt5.07 billion, up by 9.95 per cent year on year, while BAY's net profit was Bt1.86 billion, an increase of 15.51 per cent.

For most to have fallen short of targets for both loan expansion and earnings shows how seriously the banking business was affected by the country's economic slowdown and political uncertainty.

Even bigger problems occurred after the September 19 coup when, for many banks, vital business deals were called off or postponed.

The acquisition deal between BAY and GE Capital International Holdings (GECIH) was affected most by the military takeover. The bank's sale of a 25.4-per-cent shareholding to the unit of US giant General Electric was put on "hold" for one month and the transaction effectively delayed for more than three months.

BAY had approved a subscription agreement for the deal with GECIH in August, and it hinged on a shareholders' meeting on September 20, just one day after the coup. Alarmed by developments, the US company postponed its decision on the deal for one month in the expressed hope that the situation would clear up.

GECIH was earlier scheduled to pay the first lot of the Bt22.25 billion for its stake in the bank within 10 days of the shareholders' meeting, or by September 30. It had agreed to buy 1.391 million shares at Bt16 apiece.

BAY's major shareholder, Krit Ratanark, had spent about one year negotiating the deal, and when it was given the green light by the Bank of Thailand, everything seemed to be in readiness - until the fateful night of September 19 when the tanks rolled onto Bangkok's streets.

The US government expressed its grave concern over the coup, so US companies fell into line with the official attitude.

It was only when Thailand set up a civilian government and the political environment became clearer that GEHIC finally confirmed that it would go ahead with the BAY deal. The first share price payment is now scheduled for next week.

KTB, the country's biggest state-owned bank, had a similar experience.

KTB had priced a US$200-million (Bt7.5 billion) tier-1 hybrid bond offering on overseas markets on September 19, the day of the coup. The military takeover forced the bank's bond spread to swing from its price at 265 basis points above benchmark rate to around 280 to 285 basis points.

As a result, the bank cancelled the bond issue on September 21, resulting in much confusion among investors who had already subscribed to the bonds. Later, after it became obvious there would be no violence in Thailand's political situation, foreign confidence was restored.

KTB offered its bonds for a second time, two weeks later, and investors subscribed to $220 million-worth, higher than the $200 million earlier planned.

Unlike the others, a deal involving BankThai has barely been affected by the coup. The bank still expects to sell a major shareholding to TPG Newbridge, an Asian investment arm of the US-based Texas Pacific Group, although the coup occurred when the deal was still under negotiation.

The bank signed a memorandum of understanding with the US fund on November 22 and the acquisition deal is expected to be completed next month. BankThai has increased its capital by 940 million shares at par value of Bt10 apiece and is likely to sell 731.45 million shares to TGP, representing 24.99 per cent of its total shares. This is equal to the current holding in BankThai of the Financial Institutions Development Fund.

SCB's image was also hit by the political issue. The country's third-largest bank was one of the key players behind the hugely controversial takeover of Shin Corp by Temasek Holdings of Singapore.

SCB provided financial advice and Bt13 billion in loans to Cypress Holdings, a subsidiary of Temasek. The bank also holds a 5-per-cent stake in Cedar Holdings, which now has a controlling stake in Shin. Cedar's major shareholder is Kularb Kaew, which is currently under investigation by Thai authorities as an alleged nominee for Temasek. This has raised questions about SCB's good corporate governance.

Although SCB celebrated its 100th anniversary in 2006 with a success in business operations, it may well remember last year as the one in which its image was tarnished.

Somruedi Banchongduang

The Nation