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LH Bank to raise Bt4 bn from 10-year sub-debt

Mar 26. 2015
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By Sucheera Pinijparakarn

The

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Land and Houses Bank will issue 10-year subordinated debt worth Bt4 billion in May to raise Tier 2 capital and support its annual asset-growth target of 15-20 per cent for at least three years (2016-18).

LH Bank president Sasitorn Pongsathorn said yesterday that its sub-debt had been assigned a credit rating of “BBB”. The sub-debt will be offered to retail clients who are familiar with |this financial instrument well and institution clients.

The coupon rate is expected to be 5-5.25 per cent per annum. Interest is payable quarterly.

She said the bank in the past few years had accelerated loan growth, especially in the corporate sector with annual turnover of more than Bt500 million, hence its capital had declined a lot. Therefore it needs to strengthen capital by issuing subordinated debt.

The capital adequacy ratio currently stands at 11-12 per cent, and after issuing Bt4 billion in sub-debt, the ratio will increase to 15 per cent, high enough to support LH Bank over the next three years.

“We hope that after issuing sub-debt, the return on equity will also improve from 10 per cent as well,” she said.

Corporate loans to firms with annual revenue of more than Bt500 million account for 54 per cent of the bank’s total loan portfolio, followed by mortgages at 27-28 per cent, and lending to small and medium-sized enterprises with annual turnover of less than Bt500 million accounts for 19-20 per cent.

Amid the current economic slowdown, the bank predicts loan growth this year of around 10-15 per cent, while in the first quarter, its asset is expected to reach 2-3 per cent.

As of the end of the first quarter, the bank’s assets will be Bt170 billion, up from Bt164 billion at the end of last year.

Apart from lending growth, the bank has focused on bringing in more fee-based income, especially from bancassurance. Fee income from that source this year is expected to reach Bt130 million, up from Bt43 million last year.

Yesterday, the bank signed an agreement with Samaggi Insurance, its latest non life-insurance partner, to sell home and property insurance and motor insurance.

LH Bank has seven insurance partners, four of which are non-life insurers.

Nittaya Piriyathamwong, the managing director of Samaggi Insurance, said the company had to seek various channels to strengthen revenue as it was no longer a subsidiary of Siam Commercial Bank.

Samaggi Insurance now is a unit of ACE Group, though more than 50 per cent of total premiums are contributed by SCB.

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