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TFB vows to maintain its independence

 

Thai Farmers Bank Plc (TFB) has vowed to maintain its independence as a Thai commercial bank despite making public plans to raise its foreign ownership limit to 49 per cent and increase capital by issuing another 376 million shares.

Banthoon Lamsam, the president, yesterday sought to quell a misunderstanding in the financial markets that the country's third-largest commercial bank is preparing to cede its independence when it said it would raise the ceiling of foreign ownership from 25 per cent to 49 per cent.

While anyone with a 49 per cent stake would legally not control the bank, the reality is different, because such a large stakeholder would only need to persuade someone who owns two per cent to vote with the 49 per cent for effective control.

Banthoon said the new foreign ownership ceiling reflects a need for the bank to source fresh capital largely from international institutional investors through a private placement as the bank aims to improve its financial position, fulfil regulatory requirements and lay a foundation for future stability.

''Although we have agreed to raise the foreign ownership limit to 49 per cent, that does not mean we intend to sell the bank shares to foreign investors to the full limit. It can be lower than this ceiling,'' he emphasised.

On Wednesday, TFB notified the Stock Exchange of Thailand that subject to its shareholders' meeting on March 26, TFB will increase capital by issuing 376 million new shares on top of the existing 980 million shares. To facilitate this capital increase, the foreign ownership limit has been raised to the farthest possible limit that still assures the bank's independence.

Analysts said the big banks may survive the present ordeals while retaining their independence, but smaller banks are all expected to be wiped out or fall into the hands of the foreigners.

Banthoon said there is no need for his bank to write down its capital as in the case of other troubled banks which have been nationalised. He noted that the marketplace has already discounted the bank's capital because TFB will not be able to get any large premium, such as Bt200, for its newly-issued shares, which suggests a market-induced ''write-down'' of the value of TFB's capital.

Banthoon would not reveal the premium for the new shares in the private placement he has in mind nor the timing of their launch, stressing that it all depends on the general economic and capital market conditions. Like most other blue-chip bank stocks, TFB has undergone a sharp price swing over the past month, jumping from lows of Bt40 to close at Bt87 a share yesterday.

Based on this market price, the new shares will contribute Bt32.71 billion to the bank's capital, but analysts have indicated that the bank should be satisfied if it can raise Bt20 billion during a time of high uncertainty in the outlook for the Thai economy.

Banthoon said a foreseeable recovery in the Thai economy is a pre-condition for TFB to successfully launch its private placement -- not the other way around.

TFB, which commands a deposit base of about Bt600 billion, has shareholders' equity of Bt60 billion, which is expected to be written down by a need to maintain capital adequacy standards and fulfil tougher provisions for loan losses.

Banthoon said the bank's non-performing loans should climb higher than 20 per cent this year while last year TFB reported a non-performing loan level of about 17 per cent of total loans.

BY VATCHARA CHAROONSANTIKUL and THANONG KHANTHONG

 

 

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