GSB president and CEO Goanpot Asvinvichit told a conference here that the bank last year set aside a provision of Bt3.6 billion, which was Bt1.2 billion more than the amount required under the international accounting standard 39 (IAS39).

"We set aside the provision in excess of the minimum requirement by IAS 39 because we thought our net profit quite good and that setting aside this provision would strengthen the bank's financial position," he said.

The massive provision brought the bank's unaudited net profit down 18.4 per cent, from Bt12.34 billion in 2005 to Bt10.07 billion last year. However, if expressed in terms of profit before provision, the bank saw its profit rise 3.25 per cent last year to Bt13.67 billion, from Bt13.24 billion in 2005.

The bank's net interest margin has risen continuously, from 3.12 per cent in 2004 to 3.53 per cent last year.

Under IAS39, banks are required to set aside loan-loss reserves equalling 100 per cent of the difference between the amount of loans and the present value of debtors' cash flows. In the case of loans with collateral, the full reserve is needed for the difference between the amount of loans and the present value of collateral. This rule applies to all loans on which debtors have failed to make repayments for more than three months.

Earlier, it was reported that four other state-owned banks - the Govern-ment Housing Bank, the Bank for Agriculture and Agricul-tural Coopera-tives, the Small and Medium Enterprise Development Bank of Thailand and the Export-Import Bank of Thailand - might have to raise funds to comply with IAS39.

The GSB's non-performing loans (NPLs) as of the end of last year accounted for 3.82 per cent of its outstanding credit of Bt432 billion.

"If calculated based on net non-performing loans, or total NPLs minus the reserves required by the new standard, the bank's net NPLs would be zero," he said.

The bank's capital adequacy ratio stood at 22.26 per cent at the end of last year.

Goanpot predicts the bank's net deposits will increase Bt20 billion this year from Bt614.23 billion recorded as of the end of last year, although that would be less than the Bt30.98-billion rise in 2005.

The state-owned bank now has a liquidity surplus of Bt40 billion to Bt70 billion, but the excessive amount will be reduced this year, because the bank will focus on lending, he said, particularly on personal loans.

Goanpot said the GSB would not lower its interest rate soon, even though the central bank had cut its key policy rate and some banks followed by reducing their rates.

"We estimate that our net profit will exceed Bt10 billion this year," he said.

Chief financial officer Woravit Chailimpamontri said the bank would increase its investment in property funds this year by between Bt8 billion and Bt10 billion, because they offered high and stable returns.

Its investment portfolio now amounts to Bt270 billion, most of which is in government bonds and corporate debentures.

Oranan Paweewun

The Nation

Macau