Sunday, September 21, 2008

Three Thai banks vulnerable to Lehman Brothers troubles

Analysts point to BT, SCIB and BBL

SOMRUEDI BANCHONGDUANG

Thailand's top lender Bangkok Bank and two others - Siam City Bank and BankThai - are expected to be hit hard by the bankruptcy last week of Lehman Brothers, analysts say

BankThai (BT) is very risky given the impacts from US sub-prime woes, said an analyst at KGI Securities, citing the bank's large proportion of foreign investments worth 21.66 billion baht as of the second quarter of this year.

Foreign investment exposure was 489% of the bank's shareholder equity of 4.43 billion baht.

Siam City Bank (SCIB) and Bangkok Bank (BBL) have the second and third highest exposure to foreign investment as a percentage of equity and total assets. SCIB's foreign portfolio was 13.94 billion baht, or 37.48% of equity and 3.35% of total assets.

BBL has the industry's biggest foreign investment portfolio of 41.73 billion baht, accounting for 23.63% of equity and 2.54% of total assets.

If BBL writes off all 3.5 billion baht of exposure to the bankrupt Lehman Brothers, the analyst said it would affect BBL's book value by 1.83 baht per share based on the average of 101.2 baht at present. Some losses would be booked against third-quarter earnings.

Kulathida Sivayathorn, a BBL executive vice-president, said the bank had not finalised how to set aside provisions for its exposure of 3.5 billion baht to Lehman. It may partly reserve that investment in the third quarter.

In any case, Kiatnakin Securities anticipates positive results from the banking sector for the third quarter, which would compensate for the fallout from the US financial meltdown. But falling investor sentiment and the country's sluggish economy would reduce demand for bank loans in the last quarter of the year. The brokerage has downgraded its outlook for the sector to neutral from overweight.

Adit Laixuthai, senior vice-president of Kasikornbank (KBank), said the bank would set aside a loan-loss reserve as usual for the third quarter, in a range of 1.7 billion to 2 billion baht. It set aside reserves of 1.88 billion baht in the first quarter and 1.98 billion for the second quarter.

He said KBank's investment portfolio was 122 billion baht as of June 30, of which 6.8 billion was foreign investment. About 80% of the foreign portfolio is invested in Asian quasi-sovereign bonds, and the remainder is in debentures, commercial paper and other financial instruments of European banks.

The bank had no direct exposure to Lehman, Mr Adit said.

However, indirect impacts might be seen as the bank has outstanding loans of around 330 million baht from a rental proceeds firm that is a Lehman subsidiary. But the company's financial condition is strong and the loan was minimal, accounting for 0.03% of KBank's total assets worth more than one trillion baht, he said.

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