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FINANCIAL CRISIS
More provisions to be booked for Q3
SOMRUEDI BANCHONGDUANG
Bangkok Bank will book additional provisions in the third quarter to cover investment losses from the bankruptcy of Lehman Brothers. Kulathida Sivayathorn, a BBL executive vice-president, said the bank's provisioning in the third quarter would be ''significantly higher'' than in the second quarter to account for the bank's investments in senior unsecured bonds issued by Lehman Brothers.
Bangkok Bank posted second-quarter provisions of 1.58 billion baht, up slightly from the first quarter. First-half net profits rose 7% from the same period last year to 10.65 billion.
The bank, the country's largest, has total exposure of 3.5 billion baht to Lehman Brothers securities, the most of any Thai bank. According to the Bank of Thailand, direct exposure to Lehman Brothers by Thai banks is 4.3 billion baht, either in the form of loans or bond holdings.
Mrs Kulathida said Bangkok Bank had yet to finalise how much to set aside to cover potential losses.
''We have an amount in mind. But it could change depending on the situation. We will have to wait for the Lehman bankruptcy proceedings before finalising anything,'' she said.
Mrs Kulathida emphasised that the bank would still post a profit for the quarter, even with the higher provisioning. The bank is expected to release its results on Oct 20. Local analysts said Bangkok Bank would bear only a minor impact from the Lehman bankruptcy.
CIMB Securities estimated Bangkok Bank could take a 2.8-billion-baht charge for the loss, representing 80% to 85% against its total Lehman exposure _ a much higher markdown than earlier estimates of a 30% to 40% loss.
CIMB estimated third-quarter net profits of 3.2 billion baht for the bank, down 38.5% year-on-year and 36.6% quarter-on-quarter.
But the Lehman exposure was just 0.2% of total assets, and would not affect Bangkok Bank's overall financial picture, CIMB said in a research note.
KGI Securities also expected lower third-quarter profits for BBL due to the Lehman charge. KGI expects the bank to post earnings of 3.48 billion baht, down 32.3% year-on-year and down 30.7% from the second quarter.
A CIMB research note published in mid-September said that Siam Commercial Bank, Tisco and Bank of Ayudhya also had exposure to Lehman.
SCB has already sold off its securities at a slight loss, while Tisco's exposure was in the form of real-estate investments and covered by lease income. Bank of Ayudhya has already written down half of its exposure in collateralised debt obligations.
Lehman Brothers was one of 200 companies in the $85-million CDO pool held by BAY. Other banks with CDOs have also moved forward with writing off losses or selling assets outright.
Apisak Tantivorawong, the president of Krung Thai Bank, said the country's second-largest bank had written down its $160 million in CDOs by 80%.
He said the bank would hold the securities to maturity, opening the possibility of reversing the provisions for gains if market prices increased. Mr Apisak said KTB had no exposure to Lehman Brothers securities.
''We will set aside normal loan-loss provisions for the third quarter. Typically our provisions are 500 million baht per quarter,'' Mr Apisak said.
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