FIDF, TPG to lift stakes in BankThai

The TPG Newbridge Group will also exercise its right in the private placement scheduled this month and raise its shareholding from 33 per cent to 42 per cent, the same ratio as the FIDF.

Fund manager Tongurai Limpiti said the two entities would spend about Bt1.9 million in combination for 1.4 billion shares via private placement after the bank failed to sell all of its capital-increase shares in an earlier rights offering. The bank earlier planned to recapitalise Bt6.1 billion via a rights offering but succeeded only in gaining Bt4.1 billion.

The move will help the bank's BIS ratio reach 10.3 per cent, compared with 8.6 per cent before the private placement.

Thus, the fund will spend Bt2.8 billion for BankThai on the recent rights offering and upcoming private placement. When the private placement is completed at the end of the month, the FIDF's shareholding will increase from 33 per cent to 42 per cent - equal to the TPG Newbridge Group.

Tongurai said that after the private placement, the bank will not need further recapitalisation, because its capital-adequacy ratio will be 10.3 per cent, compared with the Bank of Thailand's requirement of 8.5 per cent.

She insisted that the ratio of 10.3 per cent was enough for further business expansion and a possible price fall of collateralised debt obligations (CDOs) in which the bank had invested. The bank has already set aside reserves of more than 40 per cent of the CDOs' value.

"The bank will not suffer a loss from the CDOs, because it has not yet sold these high-rated and low-default-rate assets. The bank gets only a mark-to-market loss but still obtains returns," said Tongurai.

However, the bank's management and board of directors must consider whether to recapitalise for another round, depending on the CDO problem, business strategy and the economy. BankThai is a wholesale bank, but it is increasingly stepping into retail business and small and medium-sized enterprises.

Tongurai said the bank's management must establish a strategy to succeed amid fierce competition in the industry. This should include the loan-approval process and risk management. It must also follow the instructions of the external auditor and the central bank.

"The bank has continuously improved its risk-management process, but there are elements that still need further improvement, such as the database system and other procedures, in order to comply with Basel II," she said.

Moreover, the bank has already succeeded in its reserve provision, in line with the new International Accounting Standard 39 and provision for potential non-performing loans.

Asked whether the shareholders would remove BankThai president Phirasilp Supapholsiri, Tongurai said that after the recapitalisation, the board of directors would possibly discuss the bank's performance and report to the fund.

BankThai released its consolidated financial statement on Monday, marking a net loss of Bt5.9 billion for last year, 34 per cent worse than in 2006.

Anoma Srisukkasem

The Nation