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BBL shares tumble on bad loans

 

AT one point on Wednesday Bangkok Bank's alien-quoted stocks, which are normally priced at a hefty premium, plunged to a low of Bt46, falling even below Thai Farmers Bank's locally quoted stocks at Bt48.25. For all the rivalries between the two major Thai banks, the fall from grace of BBL was unprecedented.

The BBL blood-bath started on Jan 29 when Chartsiri Sophonpanich, its president, admitted to a JF Thanakom-organised conference held for fund managers that the bank was facing a shockingly high non-performing level of 48 per cent of total loans. Translated into round figures, BBL was carrying Bt460 billion in NPLs from outstanding loans of Bt952 billion on its books. Of the NPLs, however, the bank has been able to set loan-loss provisions for Bt121 billion, or about 60 per cent of the regulatory requirement in line with the 2000 accounting standard.

BBL's management has gone to great lengths to assure the market that its present capital is comfortable enough. Its tier-1 capital currently stands at 9.5 per cent, exceeding the official standard of 4.25 per cent. At most, the bank will need to raise Bt10-Bt20 billion, which will help it to meet its loan-loss provisions for 80 per cent of the regulatory requirement.

However, the fund managers and investors view otherwise. Some doubt that BBL's NPLs have peaked at 48 per cent, which means that the bank would need to raise additional fresh capital by between Bt30 billion and Bt70 billion, depending on the NPLs. BBL's stocks, which stood at Bt52 on Jan 27, have begun to take a big hit as investors rush to exit. The stocks fell to Bt48.50 on Feb 1, before sliding rapidly to Bt43.50 on Friday, Feb 5.

When the stock market opened on Monday, BBL's share price continued to fall under massive selling pressure, closing at Bt43. The following day saw the bank plunge to the floor at Bt39.50 amid widespread talk in the market that Goldman Sachs, the US investment bank, wrote an extremely bearish view against the bank.

In their report update, Roy Ramos and Wanna Matanachai, Goldman Sachs banking analysts who met with Finance Minister Tarrin Nimmanahaeminda, wrote: ''Minister Tarrin now views BBL as the biggest risk factor in Thailand's banking system; he would like to see BBL use the government's tier-1 capital support programme. He points out it would be advantageous for BBL to apply earlier; delays mean higher NPLs and operating deficits, which would only increase the dilution to existing shareholders if and when the government comes in to recapitalise the bank.''

It was this widely-circulated Goldman's comment that brokers said triggered another round of a big BBL sell-off. on Wednesday, BBL lost another Bt1 to close at Bt38.50. Over a period of 12 days, the bank witnessed a dramatic loss of its share price by 26 per cent. ''It was shattering to the bank,'' said a BBL official.

This prompted the bank's management to hold a special meeting on Wednesday before a conference to issue clarifications. It came as no surprise when Dr Kosit Panpiemras, the bank's executive chairman, reaffirmed the bank's long-standing position that it would not seek tier-1 capital support from the government. BBL, he indicated, would raise Bt15-Bt20 billion in fresh capital by itself this year, which would help it carry on at least until 2000.

At the same time, the BBL official said the bank expects to see a fall in its NPLs as a result of corporate debt restructuring. However, BBL is reported to have the largest number of strategic NPLers, or the borrowers who deliberately default their repayments although they have the money on hand. Overall, BBL hopes to expand its credit by around 4 per cent this year, the official added.

Chatri Sophonpanich, BBL chairman, quipped that Goldman could have misquoted Tarrin, who was unlikely to force the bank to seek the tier-1 capital support but only recommended it as an option. Tarrin on Wednesday also made a similar comment, clarifying that he did not specifically point out that BBL needs to enter the tier-1 capital support programme.

''What I did say is that I would like Thai banks to voluntarily enter this programme so that they can tackle their NPLs,'' he said. ''I would like to see the NPLs moving in reverse and the banks recapitalising by making use of the government's tier-1 and tier-2 capital support programmes.''

However, Tarrin's comment could still be interpreted that he would like BBL and all the other undercapitalised banks to join the Aug 14 Banking Restructuring Programme so that the banking industry can return to sounder footing. Tarrin is exercising greater pressure upon the banks to accelerate their recapitalisation and debt restructuring and to increase their lending again to support economic recovery.

To his disappointment, most banks, including Bangkok Bank and Thai Farmers Bank, are acting contrarily by downsizing assets. By doing so, the banks are hoping to weather the banking distress with their management control intact and without having to seek tier-1 capital support. But their downsizing jeopardises chances of economic recovery. This is the dilemma that will be played out in full drama over the months to come.

BY THANONG KHANTHONG

 

 

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