Banks ready to handle uncertainties

BIS ratio and tier-one capital base adequate, no need to raise additional capital, execs say

Local commercial banks are confident that their existing BIS ratio and tier-one capital base can handle economic uncertainties, with no need to raise additional capital.

Manop Sangiambut, chief financial officer of Siam Commercial Bank, said SCB has maintained a BIS ratio at the highest threshold domestically and regionally at 18.7%, of which 17.6% was tier-one capital as of September.

The bank expects to be able to cope with higher economic uncertainties and rising non-performing loans (NPLs) amid the contagion.

As a result, the bank does not need to increase additional capital through fund injection or debt market instruments.

“With the bank’s internal stress test per central bank requirements, we expect the existing cushion will be enough to cope with economic uncertainties,” Mr Manop said.

SCB, the country’s fourth-largest commercial lender by total assets, will continue maintaining prudent financial management by setting aside loan-loss provisions for the next quarters.

The bank will also continue helping customers who cannot service debts after the central bank’s debt relief measures for small and medium-sized enterprises (SMEs) expired on Oct 22.

Around 70% of SCB’s retail customers who participated in the debt relief measures are able to repay their debts normally.

About 25% of retail customers who want to continue participating in the debt assistant programme, with the majority identified as auto loan clients who are micro business owners. Some 5% of the retail customer segment cannot be reached by the bank.

Under the Bank of Thailand’s targeted measures for debt restructuring, the regulator encourages financial institutions to help SMEs that could not repay their debt burdens when the debt relief measures ended on Oct 22 through debt restructuring on a caseby-case basis.

The financial assistance also covers a suspension of principal and interest payment for six months on a case-by-base basis.

Separately, Pairote Cheunkrut, chief strategy officer of Bank of Ayudhya, marketed under the Krungsri brand, said the bank’s BIS ratio of 17.1%, of which 12.2% is tier-one capital, is enough to cushion against uncertainties.

Despite Krungsri’s BIS ratio being lower than that of other large commercial banks, its major shareholder, Mitsubishi UFJ Financial Group, is another buffer to back up the bank’s capital base and business operations, Mr Pairote said.

The bank doesn’t need to raise additional capital or raise funds through issuing debt instruments to increase the capital adequacy ratio (CAR), he said.

Piti Tantakasem, chief executive of TMB-Thanachart Bank, said the bank issued additional tier-one capital bonds worth US$400 million in late 2019 before the integration of TMB Bank and TBank, helping to strengthen its tier-one capital base in preparation for the business operations of the merged bank.

“The solid capital base will support the banks to have more room on loanloss reserve setting,” Mr Piti said. “From now on, we expect to set additional provision on a quarter-by-quarter basis until next year’s second quarter.

“The stronger cushion will be a preparation for higher NPLs of SME businesses from the existing debt suspension programme.”