SME Bank wants to count fixed assets

State-owned SME Bank comes under Basel I risk-based capital requirements, unlike commercial banks that have to comply with Basel III. It only has Tier 1 capital, comprising its own capital and annual profit.

On Tuesday, shareholders approved a capital-increase from Bt20 billion to Bt30 billion by issuing 100 million new shares at Bt27.58 per share to existing shareholders, mainly the Finance Ministry.

The price is based on book value, which is lower than par value of Bt100, meaning the bank will receive Bt2 billion in new capital next month.

After the capital-raising, the Finance Ministry’s interest will rise to 98.88 per cent from 98.24 per cent. 

Most of the new capital will be reserved for loan expansion and Bt500 million will be invested in the Finance Ministry’s venture capital fund called SMEs Private Equity Trust Fund to help SMEs.

After the capital-mobilisation, SME Bank’s BIS ratio will rise to 11.5 per cent from 7-8 per cent, but if the Finance Ministry agrees with SME Bank’s proposal, the ratio will climb to 12-13 per cent.

Chairwoman Salinee Wangtal said yesterday that debenture issuance is another means to support the bank’s capital, but the bank should reinforce its credit first. The current tight liquidity situation in Thailand is unlikely to encourage issuance.

“What we are worrying about is that the economy is at a low-growth stage, making liquidity scarcer. Commercial banks aim to participate in the government’s mega-projects, which means they have to mobilise funds in the first half to prepare for loan demand in the second half,” said Salinee, who was once an assistant governor at the Bank of Thailand.

One reason for the liquidity crunch is that Thai businesses have expanded to the offshore market. Companies have moved their money out of Thailand, she said.

In the second half of this year, the bank plans to ask the Finance Ministry to allow it to launch fixed-deposit accounts for individuals. At present, SME Bank receives a minimum of Bt10 million in deposits from juristic persons. 

This year, SME Bank has set an ambitious target to advance Bt40 billion in new loans, of which Bt20 billion would be net new loans, so it needs more financial muscle from its shareholders.

Last year, SME Bank concentrated on resolving non-performing loans and turning special-mention loans into performing loans, so it could not do much lending. 

The bank started extending credit in November, so new loans in 2014 reached Bt9.87 billion while outstanding loans dropped by 8.6 per cent from Bt96 billion to Bt85 billion.

Under its business plan for 2015 forwarded to the State Enterprise Policy Office (Sepo), the lending focus will be on serving small businesses with a credit line of less than Bt15 million, while limiting non-performing loans to a maximum of 5 per cent of its loan portfolio will be acceptable. 

The bank has talked with Sepo about being able to relax the small business credit line cap for two situations. One is for existing SMEs that make regular debt repayments and have outstanding loans of less than Bt15 million, but require new loans that might make their outstanding loans exceed Bt15 million. The bank should help them in expanding their business even though their credit line will be above Bt15 million.

The other situation covers |customers whose loan applications were already approved by the |bank before it submitted the business plan to Sepo and the State Enterprises Policy Commission, or Superboard. 

The new business plan requires the bank to speed up resolving existing NPLs of Bt31.96 billion, which represents 37.6 per cent of outstanding loans. The bank is in the process of selling NPLs worth Bt10 billion.

NPLs in 2015 should stay at Bt20 billion, but NPLs are not a problem for the bank as long as it can keep up profitability, she said.

In 2014, SME Bank recorded a net profit of Bt334 million.