Few takers for KTB presidency
February 19, 1999: Vatchara Charoonsantikul and Thanong Khanthong examine the difficulties in finding a new president for the all-important Krung Thai Bank.
MR Pridiyathorn Devakula, president of the Export and Import Bank of Thailand, yesterday counted himself out as one of the leading candidates for the top position of president and CEO of Krung Thai Bank.
He burst out that he would not accept the offer at Krung Thai, regardless of who will approach him with the proposal, because he prefers to continue working for the Exim Bank. ''I have nothing to do with Krung Thai Bank. I don't belong to any gang, any group, and I am not anybody's subordinate. I'm not interested in and will not go to Krung Thai. I am very happy here at the Exim Bank,'' he said.
Pridiyathorn's rejection highlights the plight of the Thai banking industry in general and the state-controlled Krung Thai Bank in particular. Plagued with management problems, Krung Thai is badly in need of a capable captain to propel it out of the banking crisis. In the case of Pridiyathorn, nonetheless, there is no smoke without fire.
Financial sources say he is the favourite of Tarrin Nimmanahaeminda, the finance minister, who has high respect for his all-around qualities. Tarrin, who has reclaimed his oversight authority over Krung Thai from the Bank of Thailand, has been pondering Pridiyathorn's candidacy for some time, but financial sources say some key members of the Democrat Party do not trust Pridiyathorn.
This has shortened the list of candidates for the top job in Krung Thai as Thai bankers and financiers have become a rare breed after the collapse of economic bubble. The other day Chaktip Nitibhon, the country manager of Credit Agricole Indosuez who is leaving to join the Financial Institution Development Fund, said he was shocked to have found that some 40 per cent of Thailand's top financial executives have disappeared from his New Year card list because most of the financial institutions have either closed down or merged with others.
''With the dust still hanging thick in the air, I don't think anyone would like to expose himself to the dirt,'' says a financial executive of an infrastructure company. ''It's a tough job for Tarrin, who is becoming increasingly isolated.''
For Tarrin, reviving Krung Thai to full solvency is one of his primary objectives. Krung Thai is the only hope for the government to recover its massive losses in bailing out the financial system. More than Bt1.2 trillion has been pumped into the financial system to keep it afloat. Of this, Bt130 billion was wasted in the Bangkok Bank of Commerce saga. Some Bt500 billion will be lost through the bailout of the 56 defunct finance companies. Apart from merging a host of the remaining finance companies, six banks have been nationalised at high cost with money from the Financial Institution Development Fund.
Now Tarrin is mounting a process to privatise these ailing banks, hoping to return as much money to the state's coffers as possible. Bangkok Metropolitan Bank and Siam City Bank are on the auction block and have already wooed potential buyers such as Citibank and Hong Kong and Shanghai Bank. Krung Thai is also scheduled to be privatised by at least 50 per cent next year. The strategy is based on a profit-sharing scheme in that the government will agree to a stop-loss limit of new buyers in case the banks suffer more damages but the government will also enjoy the upside gains if the banks make a turnaround.
For every jump of Bt10 in its stocks, Krung Thai will gain Bt200 billion to relieve the government's financial woes. The bank, which had gross loans of about Bt956 billion, is now trading at Bt14.75 a share. But Securities One, a local brokerage firm, projects its stocks will fall to Bt8 by year-end.
But Krung Thai's turnaround won't come easily, given its huge non-performing loans of 42 per cent, or Bt290 billion, as of the third quarter of 1998. It set aside a loan-loss reserve by only Bt61.2 billion. Krung Thai says it needs another Bt85.2 billion to meet the Bt146.4 billion in the year 2000 provisional standards.
Securities One says with NPLs expected to peak at 55 per cent, the bank is expected to report greater losses this year after losing Bt60 billion in 1998. After receiving a capital injection of Bt77 billion in December last year from a debt-to-equity swap with the FIDF, Krung Thai is hungry for government money by another Bt108 billion, which should come around by March. But this depends on its ability to restructure its management to satisfy Tarrin's demand. It has merged with First Bangkok City Bank and partially absorbed the assets of Bangkok Bank of Commerce, which will increase its provisional burdens.
Overall, Krung Thai plans to raise Bt219.85 billion, an increase of Bt185 billion.
With the awesomely huge public money needed to keep Krung Thai afloat, Tarrin is under pressure to justify putting additional money into the bank -- the only main source that could repair some of the damage to the government's coffers. He has recently talked with chairman Meechai Viravaidaya to make sure that his message got across. The arrival of the world-famous family planner has failed to bring fresh momentum to the bank, beset by a series of management fiascos.
Financial sources say Tarrin would like the bank to achieve three mandates. First, for all the legal and operational complications, it must proceed to merge smoothly with First Bangkok City Bank and Bangkok Bank of Commerce. Second, the bank must work out a way to clean up its bad loans. And finally, it must put the best management in place to get the whole operation moving.
It appears that Meechai is not keen in handling these highly technical mandates. Besides, most of the new board members do not have direct banking experience to deal with the problems inside the bank. Aswin Kongsiri was earlier brought over to become Krung Thai's CEO, but it was evident a conflict of interest since he was also heading Bangkok Bank of Commerce. Vicharat Vichit-vadakarn also ran into legal problems when he accepted a directorship at Krung Thai although he was then simultaneously secretary-general of the Financial Sector Restructuring Authority. Vicharat was also earmarked by Meechai to become Krung Thai's CEO, but he will be dropping out.
With all the top candidates fading from the scene one by one, it will be an uphill battle for Tarrin to get the ideal candidate he wants to head Krung Thai. Dr Vichit Suraphongchai, the chairman of the Radanasin Bank, is one ideal candidate, but he is working effectively behind the scenes, now busy privatising Radanasin. This leaves the choice narrowing to Sivaporn Darandaranda, who is helping the Bank of Thailand to work on the debt restructuring formula and who does not appear to have any wounds. But who really can read Tarrin's mind and next move?