Sepo to report IBank partner rejection
State-owned Islamic Bank of Thailand’s (IBank) refusal to accept a partnership proposal will be reported to the superboard by the State Enterprise Policy Commission at this week’s meeting.
The State Enterprise Policy Committee (Sepo) will inform the superboard that a committee on considering a partnership deal for IBank turned down proposals made by a few investors as it was not satisfied, said a source at Sepo.
The proposed price was too low relative to the bank’s improving financial performance, said the source.
Even though IBank failed to secure a partnership, it continues to pursue its business rehabilitation plan, for which a 18-billion-baht fresh fund injection from the Finance Ministry to bring the bank capital adequacy ratio (CAR) to zero from negative territory and seeking a new business partner are integral parts.
The bank’s recapitalisation plan could be reconsidered, the source said.
Local media earlier reported that three groups of investors had shown interest in acquiring a sizeable stake in the bank and that Wichai Thongtang, a major shareholder of Bangkok Dusit Medical Services Plc, was among the interested investors.
The National Legislative Assembly has approved a revision to the law governing IBank to permit the Finance Ministry to hold more than 49%, a move to pave the way for the state-owned bank’s capital increase. The law is awaiting announcement in the Royal Gazette, and the Finance Ministry’s share in IBank will become 99% after the capital injection.
The Finance Ministry currently holds a 48.5% stake in IBank, while the Government Savings Bank holds 39.8%, Krungthai Bank holds 9.83% and other shareholders own the rest.
IBank is one of seven state enterprises under rehabilitation after accruing high non-performing financing (NPF) and net losses. The others are Thai Airways International, State Railway of Thailand, Bangkok Mass Transit Authority, TOT Plc, CAT Telecom, and the Small and Medium Enterprise Development Bank of Thailand (SME Bank).
SME Bank exited from the business rehabilitation plan after its earnings turned a corner.
Vitai Ratanakorn, former acting president of IBank, expects the banks to record a profit of over 300 million baht this year after tallying net losses over the past 4-5 years.
The bank has been on the path to recovery after it transferred NPF worth 50 billion baht to Islamic Bank Asset Management Co Ltd (IAM), which is wholly-owned by the Finance Ministry, in return for 22 billion baht in promissory notes.
The source said incorporating IAM is the right approach as other operating asset management companies would offer to buy the bad assets below book value if IBank decided to divest such assets to them and this would open opportunities for the bank’s bad borrowers to buy their debts at cheap prices.
The root of IBank’s problems was corruption in its lending. Most of the bank’s NPF was lent to non-Islamic borrowers, with 80% extended to 200 borrowers.