Thanachart and Krungthai are the first two banks to show steely enough wills to issue subordinated debentures to strengthen their Tier 2 capital despite the gloomy investment prospects.
Anuwat Luengtaweekul, executive vice president and chief financial officer of Thanachart Bank, said yesterday that it would go ahead with the issue of Bt10-billion debentures next month to redeem debentures maturing in August.
Despite the coup, the bank will file its debt plan with the Securities and Exchange Commission (SEC) this week.
The Tier 2 bonds will be offered to local investors and customers with assets under management at the bank of at least Bt10 million, in conformance with a regulation of the SEC to comply with Basel III.
Although issuers might have to bear a higher cost of funds under Basel III, the coupon for the new issue might not be much higher than the 6 per cent for the old one because the bank’s credit rating has improved to “AA-” from “A+”.
The military putsch did not shake up its debt plan.
TBank also plans another bond issue worth Bt7.1 billion to its major shareholders, Thanachart Capital and the Bank of Nova Scotia, to fortify its Tier 1 so that its capital reserve ratio will rise to 15 per cent by year-end from 14 per cent now.
Krungthai Bank has filed to the SEC its intention to issue 11-year subordinated debentures worth US$1 billion in the offshore market to top up its Tier 2 capital.
The tranche is part of its $2.5-billion Euro Medium-Term Note (EMTM) programme.
Kittiya Todhanakasem, first senior executive vice president, said the plan had not changed, but the SEC gave it six months of flexibility.
The bank has not considered yet whether to issue all $1 billion at one go, as it has to consider many variables including suitable timing.
“The filing is part of the bank’s preparation. To sustain capital, we have to do it carefully. However, the announcement of the [deal] is not finalised yet,” she said.
As of the end of last quarter, KTB’s capital reserves were 13.3 per cent, of which Tier 2 capital was 3.4 per cent, down from 4.6 per cent as of the end of last year.
The economic circumstances are challenging the bank to bring its non-performing loans back down after gross NPLs, mainly from retail and small-business customers, spiked last quarter to 2.87 per cent from 2.58 per cent at the end of last year.
However, the bank hopes that by leveraging the collection team of Krungthai Card, its credit-card subsidiary, it can control NPLs this quarter.
The bank has also fine-tuned screening for each industry using risk-weighting models, so it still expects to set aside normal loan-loss provisions for this quarter.
KTB will focus seriously on fee income in the rest of this year amid the slowdown in new loans, Kittiya said.