IBank loan limit raised to B500m

Some B40bn of NPF to be divested

The State Enterprise Policy Office (Sepo) has approved raising the loan limits for state-owned Islamic Bank of Thailand (IBank) to 500 million baht per new borrower from 200 million to sharpen the beleaguered bank’s competitiveness.

To prevent the bank from repeating past mistakes, IBank is required to have stringent requirements for extending commercial loans and the new ceiling loan amount applies to new borrowers only, said a source at Sepo who requested anonymity.

Soured corporate loans have been blamed for IBank’s non-performing finance (NPF) surging to over 40%. IBank is one of seven financially ailing state enterprises the State Enterprises Policy Commission or superboard has instructed to undertake rehab plans.

Sepo’s website reported IBank’s loans outstanding amounted to 98.7 billion baht at the end of 2015, with NPF totalling 48 billion or 46.7%. The banks’ capital adequacy ratio (CAR) plunged into negative territory of 21.4%. Moreover, its retail losses amounted to 24.2 billion baht and the return on assets was -4.57%.

The source said IBank is still seeking a new partner and it is not necessary that the firm be Islamic, though it should have expertise in sharia-compliant financial services and a network to deliver products and services.

There have been interested groups from several Muslim countries negotiating with the bank, but the source would not disclose their names.

Earlier, an IBank executive said the Finance Ministry will maintain at least a 25.5% stake in the state bank following any partnership to keep its voting rights. The ministry holds a 48.5% stake in IBank, the Government Savings Bank 39.8%, Krungthai Bank 9.83% and other shareholders the rest.

Before any new partnership, IBank needs to clean up bad assets by divesting 40 billion baht worth of NPF to a stateowned asset management company at book value to be compliant with the superboard’s resolution, the source said.

Upon divesting the NPF, the bank will have 50 billion baht worth of performing finance and 3.4 billion worth of NPF lent to retail Muslim operators, the source said. The divestment will allow its CAR to swing back to at least 8.5%, the Bank of Thailand’s minimum requirement.

The bank has both deposits and lending of 90 billion baht and its retained loss amounts to 10 billion.

Permanent secretary f or finance Somchai Sujjapongse said IBank’s business rehab plan will go for cabinet approval soon.