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KTB's NPLs may hit 67%

August 19, 1999 -- FITCH IBCA, the international rating agency, said it expects Krung Thai Bank's (KTB) non-performing loans to increase from 59 per cent to 66-67 per cent, assuming its need to absorb the First Bangkok City Bank's (FBCB) non-performing loans of 80-85 per cent (about Bt225-Bt235 billion).

Vincent Milton, Fitch IBCA's banking analyst, said in a statement to The Nation: ''We understand that KTB has excluded its provisioning requirement of about Bt146 billion for FBCB's bad loans because, as noted in KTB's audited accounts this will be dealt with separately under a loss sharing arrangement with the Ministry of Finance and the central bank's Financial Institution Development Fund.''

Milton said he got the impression from KTB's management that the bank will be protected from any losses arising from its absorption of the defunct FBCB.

''Excluding provisioning required for FBCB, we estimate that KTB's required loan loss reserves should be approximately Bt258 billion, which would require around Bt96 billion in additional provisions,'' he added.

Milton issued the comment in view of the controversial audit report of KTB conducted by PricewaterhouseCoopers, which estimated that KTB was saddled by 84 per cent of the NPLs and would need provisions of Bt364 billion to Bt394 billion.

Both Singh Tangtaswas, the president of KTB, and David Edmonds, partner of PricewaterhouseCoopers, have clarified that the PricewaterhouseCoopers' report, leaked to the press last week as part of a political conspiracy, was preliminary and could not be relied upon as conclusive assumptions of the actual financial status of the bank.

PricewaterhouseCoopers' arrived at KTB's NPL figure of 84 per cent by sampling 42 per cent of KTB's total loans by value and 60 per cent of FBCB's total loans by value. The loans included in the sample were based on the size of the debt owed to the bank. As a result the review concentrated on the larger loans, although a small number of smaller corporate and retail loans were included, selected at random.

While Edmonds defended this sampling method as a reasonable representation of the loan portfolio as a whole, Singh argued that the sampling was not a representation since KTB was about three times larger than FBCB but the sampling of KTB's loans was smaller than FBCB's loans.

As of the end of June, KTB's NPLs stood at 59.3 per cent, the bank said.

Reuters added: Milton also told Reuters television yesterday that there could be confusion over KTB's NPL figure of 84 per cent. ''The figure looks bad, but 84 per cent, I think there is some confusion as to whether that is the figure applying to First Bangkok City Bank or Krung Thai Bank,'' Milton said.

Milton said there was still uncertainty as to the level of provisioning that would be needed at Thai banks to cover expected severe loan losses.

He said Thai Farmers Bank and Bangkok Bank stood out as two of the better-capitalised banks but others would need to raise further capital over the next 12 months to meet losses.

However, he said that in the past three months it appeared NPL levels of banks that had not been nationalised -- Bangkok Bank, Thai Farmers, Siam Commercial Bank, Bank of Ayudhya and Thai Military Bank -- had stabilised at around 45-50 per cent.

''With the infrastructure in place -- the new bankruptcy laws and certainly a more conducive interest rate environment -- we would expect to see the levels of NPLs slowly coming down over the course of the next 12 months.''

He said the bank were still faced with very high NPLs by international standards.

''Even with a massive effort in loan restructuring, Thai Farmers Bank and Bangkok Bank will still be faced with 30 per cent non-performing loans at the beginning of next year,'' he said. ''It will be another year or two before they could bring that down significantly to a level they can handle.''

BY THANONG KHANTHONG

 

 

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