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Published on January 23, 2008

The bank yesterday told the Stock Exchange of Thailand that last year's net loss of Bt5.93 billion was 34 per cent higher than the Bt4.42-billion loss recorded in 2006. The poor result was due to total provision for loan loss of Bt9.24 billion, mainly to cover its CDO investment.

BankThai said loss from CDO investment of Bt6.72 billion consisted of an unrealised loss of investment valued at Bt5.21 billion and a realised loss of Bt1.50 billion.

On December 31, the bank changed its accounting approach for valuing CDO investments, adopting a "mark-to-market" approach in line with the central bank's requirements.

Under this system, unrealised losses from CDO investments were about US$104 million (Bt3.44 billion). However, to be conservative, the bank instead recorded a loss of $107 million.

A mark-to-market figure calculated by arrangers was $122 million. The quotation was not used because it incorporated hedging costs, rebalancing bank book costs, liquidity premiums, operational risk premiums, unrecognised revenue and transaction profits.

At the end of 2007, the bank said its CDO investments, referencing corporate credit default swaps, involved principal of $260 million.

BankThai said it had set aside loan-loss provisions of Bt1.41 million to cover the debts of one of its major borrowers, the President Agri Trading Group. It also made additional reserve allowance for doubtful debts of Bt826 million.

Meanwhile, Siam Commercial Bank (SCB) believes this year's operating result will be better than last year's. The improved prospect is based on a plan to reduce its cost-to-income ratio and bad debts, as well as expanding its loans, president Kannikar Chalitaporn said.

Thailand's fourth-biggest bank recorded a net profit of Bt17.35 billion last year, up 30.65 per cent from Bt13.28 billion in 2006.

SCB aims to reduce its cost-to-income ratio from 53 per cent last year to 52 per cent in 2008, and plans to reduce gross non-performing loans from 6 per cent to 5 per cent of total loans.

Somruedi Banchongduang

The Nation