CIMB Thai plans fund for insurers via bonds

CIMB Thai Bank will seek shareholders’ approval at a meeting this Friday to issue a debenture worth Bt70 billion, with a plan to offer some of the funds raised to help insurance firms maintain sufficient capital to cover maturing policies.

Chief financial officer Narongchai Wongthanavimok said yesterday that the debenture would consist of structured notes with tenor of 15-20 years. 

Foreign banks have offered similar instruments to insurance companies. CIMB Thai earlier issued debentures to three insurance companies in amounts ranging from Bt500 million to Bt1 billion.

The bank aims to issue structured notes worth Bt5 billion to insurance companies this year, and having this instrument will help ease the pressure of deposit mobilisation for retail banking, Narongchai said.

The Bt70-billion debenture is expected to maintain the bank’s capital for at least three years, 

he said.

He noted that the bank would try to use fee-based income to increase profit and sustain its BIS ratio – that between risk-bearing capital and risk-weighted assets, a measure applied by the Bank for International Settlements – rather than with a capital increase. The proportion of fee-based income is targeted to climb to 40 per cent from 25-30 per cent currently. 

“We have no plan to increase capital for at least three years because that would pull down our return on equity. 

“We have to use our profits to maintain Tier 1 capital,” he said. 

He added that if lending grew by 15 per cent per year without focusing on fee income, the bank would need to increase capital. 

At the end of last year, CIMB Thai had a BIS ratio of 16.3 per cent, of which 10.3 per cent was Tier 1 capital. 

Narongchai said fee-based income this year was projected to grow by 30-60 per cent, compared with lending growth of 25-30 per cent.

The expansion of fee-based income will mainly be driven from the corporate deals of Royal Bank of Scotland apart from bancassurance, corporate finance and treasury products. Last year, CIMB Group Holdings acquired the Asian operations of RBS.