SME Bank to seek ministry guarantee for Bt5 billion-Bt10 billion bond issue
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THE SMALL and Medium Enterprise Development |Bank of Thailand has proposed that the Finance Ministry guarantee an issuance of Bt5 billion to |Bt10 billion in bonds to boost the bank's liquidity |after a sharp drop in its capital from unresolved bad debts
Manoonrat Lertkomolsuk, president of SME Bank, said it planned to raise funds through the bond issuance. As discussed with the bank’s financial adviser, the bond issue would take place within the current quarter or early next year.
Pichai Chunhavajira, SME Bank’s chairman, said it currently had Bt5 billion in capital, down from Bt10 billion at its peak, blamed on its bad-debt problem.
The bond issue would be a way to mobilise funds to improve liquidity and for business expansion without depending on such means as chasing deposits.
Now is the proper time for issuing bonds because of high liquidity and low interest rates, he said.
The bank will need to have the Finance Ministry guarantee the bond issue to help lower the interest rate, while it has to comply with the rehabilitation plan it promised the ministry.
The bonds will have a maturity of five to seven |years, the same terms as the bank’s credit extensions.
Manoonrat said that as of last month, the bank recorded non-performing loans (NPLs) of Bt31 billion, or 34 per cent of its outstanding loans. It aims to lower this to Bt28.85 billion, or 29-30 per cent of its outstanding loans, by the end of this year.
According to its debt-restructuring plan, SME |Bank will sell Bt2 billion in NPLs to Thai Asset Management Corporation and reduce bad debts by |about Bt1 billion per month. From now to the end of this year, the bank is expected to cut NPLs by Bt5 billion, while about Bt200 million to Bt400 million worth of credit, particularly from public service accounts, will likely go bad. NPLs from public-project accounts now total Bt1.8 billion.
SME Bank now expects new lending to finish the year at Bt95 billion, lower that its Bt115-billion target. To date, the figure is Bt91 billion.
The bank expects net profit of Bt500 million to Bt600 million this year. Its capital adequacy ratio stays at 7 per cent, below the Bank of Thailand’s requirement of 8.5 per cent.
If the Finance Ministry approves the bank’s capital increase of Bt2 billion, the capital adequacy ratio will rise above 8.5 per cent.
