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Published on August 6, 2007

Deja Tulanant, senior executive vice president, said last week that the bank's reserves for loan losses might need to be beefed up this half year to account for deteriorating loan quality.

Full-year provisioning will be greater than last year but not by a significant amount and not enough to act as a drag on Bangkok Bank's results, he said.

In the second quarter, the country's biggest bank set aside provisions of Bt1.4 billion, topping up its doubtful loan reserves to Bt71.1 billion.

That was Bt12.7 billion in excess of the first-half reserve minimum required by the Bank of Thailand.

Siam Commercial Bank's loan-loss reserves for the year will also increase by Bt2.4 billion over last year. It has been adding Bt300 million per month to reserves so far this year, compared with Bt100 million a month last year.

"Our reserve augmentation is in line with the country's uncertain environment in both political and economic terms. We believe Bt300 million of monthly provisions is enough, so the bank won't need additional reserves for the rest of the year," CEO Vichit Surapongchai said.

The allowance for doubtful loans for the third-largest bank at the end of the second quarter stood at Bt47.9 billion.

Krung Thai Bank also needs higher loan-loss reserves than last year after its non-performing loans (NPLs) went up by about 20 per cent in the first half.

President Apisak Tantivora-wong said the biggest state-owned bank planned to provision for both general and extra reserves of about Bt10 billion this year, slightly up from last year. The Bt10 billion in reserves for the year would make for smooth operations next year, he said.

Although the bank's distressed assets are likely to increase slightly this half, they will peak by the end of the year and gradually come back down next year.

That means Krung Thai Bank next year will set aside provisioning for general loan losses only, while the extra reserve will likely not be needed. Therefore, provisioning will decline from this year, said Apisak.

The bank has set aside Bt6 billion for bad assets and doubtful accounts in the first half. The remaining Bt4 billion will be booked in the current half.

Kasikornbank's loan-loss provisioning for the year is close to last year at about Bt1.2 billion to Bt1.3 billion per quarter. That is expected to cover NPLs throughout the year, said president Prasarn Trairatvorakul.

That pace will be continued next year and could satisfy requirements under the new international banking standard, Basel II, he added.

Somruedi  Banchongduang

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