"We want our subsidiaries to pay as high a dividend ratio as they can - particularly, the finance firms that the bank wholly owns - to reduce the impact from accounting standards numbers 44 and 45," president Apisak Tantivorawong said this week.

Listed companies now have to record investments in subsidiaries and associated companies in their financial statements by the equity method instead of the cost method.

The country's largest state-owned bank had to write off Bt1.49 billion in the value of the bank's subsidiaries and associated companies from shareholders' equity in the first quarter. Its net profit in the quarter was Bt4.4 billion, down from Bt4.64 billion in the same period last year.

Kittiya Todhanakasem, KTB's senior executive vice president, said the new accounting policy would shave Bt300 million-Bt400 million off the bank's net profit every year. However, if the subsidiaries can pay dividends at 100 per cent of their net profit, the net impact on the bank's earnings would be less than Bt300 million per year.

The dividend policy of each subsidiary would have to reflect its expansion plans. If they need more funds in some years, then dividend payments would be reduced, possibly suspended, she said.

The change of accounting standards will make KTB consider more carefully investing in its subsidiaries. But its wholly owned financial units are strategically important. The bank will fully support them to grow, she added.

"The bank isn't concerned much about the accounting change because the subsidiaries don't generate core income for the bank, which comes mainly from the bank's own operation," Kittiya said.

Apisak recently said KTB classified its subsidiaries into concerns that are 100-per-cent owned and units in which it holds at least 40 per cent. Since the bank is a state enterprise, its wholly owned commercial subsidiaries automatically become state companies. They will have no flexibility in running their business.

The bank holds 47.61 per cent of Krungthai Card, 100 per cent of both Krung Thai Asset Management and Krung Thai Leasing and 50 per cent of KTB Securities.

Somruedi Banchongduang

The Nation