"Suitable asset size for the bank should not exceed Bt200 billion, according to the bank's potential for business operations. The desired asset size was estimated from the bank's cost-to-income ratio," Charnchai said.

The bank's cost-to-income ratio is about 70 per cent. Large banks have a ratio of 50 per cent and middle-sized banks average 60 per cent.

Separately, ACL Bank president Thongchai Anathothai said its total current assets were around Bt40.41 billion. The figure should increase to Bt60 billion this year, rising to about Bt70 billion next year and Bt80 billion in 2009.

This year the small bank, which was previously a finance firm, aims to provide new loans of Bt10 billion, an increase of 40 per cent.

"The banking industry's coverage in the provinces is only 60 to 70 per cent of the entire market, so there is still quite a large amount of room to expand loans. We also plan to open eight more outlets nationwide, to go alongside our current four branches," Thongchai said.

Bangkok Bank has to lower its shareholding in ACL Bank to comply with the Bank of Thailand's requirements. The country's largest bank has a stake of 19 per cent and must reduce it to 10 per cent. Another major shareholder is the Finance Ministry, with a stake of about 31 per cent.

ACL Bank reported a net profit of Bt759 million in 2006, down 35 per cent from previous year mainly due to an increase in operating costs and loan-loss provisioning.

The bank set aside reserves of Bt115 million last year as the International Accounting Standard 39 allowance.

This year, the bank expects to set aside loan-loss provisioning of about Bt100 million and aims to decrease bad debts from 6.2 per cent of total loans to 1.5 per cent.

Somruedi Banchongduang

The Nation