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Published on November 12, 2007

Kasikornbank will set aside greater loan-loss provisions next year because the country's political picture remains unclear.

Some other large banks are keeping provisions the same as this year.

KBank's estimated loan-loss reserves in 2008 will be between Bt1.7 billion and Bt2 billion. This year they were between Bt1.3 billion and Bt1.4 billion.

President Prasarn Trairatvo-rakul said that in spite of a general election later this year the make-up and polices of a new government remained unclear.

In addition, external risks will escalate, from crude-oil prices to a second round of United States sub-prime worries.

The country's fourth largest bank has set an ambitious loan-growth target for 2008 too. It wants to increase total outstanding loans by between 10 per cent and 15 per cent. This year it increased loans by between 9 per cent and 13 per cent.

The bank revised lending growth this year after it advanced just 7.76 per cent for the first nine months. Its target had been between 8 per cent and 13 per cent.

To comply with the new Basel II international financial standard the bank projects a 1-per-cent impact on its capital adequacy ratio (CAR).

As of September this year its CAR was 14.82 per cent - 3.85 per cent first-tier capital and the remainder second tier.

KBank expects gross non-performing loans (NPLs) could reduce next year to between 5 per cent and 5.5 per cent from 6.3 per cent at present.

Meanwhile Krung Thai Bank president Apisak Tantivorawong said it would set aside additional loan-loss provisions in the current year.

"We intend to clear the bank of NPLs this year and so have set aside quite a lot extra. Next year provisions will be back to normal," he said.

In the third quarter it set aside an additional Bt5.7 billion to cover bad debt.

The bank's total outstanding distressed loans were Bt6.6 billion as at third-quarter reckoning. Gross NPLs were 9.97 per cent of total lending.

Siam Commercial Bank president Kannikar Chalitaporn said it expected provisions to be around Bt3.6 billion next year, similar to this year. The bank controlled bad debt in line with its target reduction to 6 per cent of all loans by the end of the year. At the end of September they were running at 7.2 per cent.

Bangkok Bank president Chartsiri Sophonpanich said provisions would likely be equal to those of this year. He believed economic sentiment would remain static in 2008.

Provisioning in the third quarter alone amounted to Bt1.2 billion, and the bank's outstanding loan-loss reserve at the end of the quarter was Bt70.7 billion, well above the minimum level required by the Bank of Thailand of Bt55.9 billion.

Somruedi Banchongduang

The Nation