The Small and Medium Enterprise Development Bank (SME Bank) is seeking the Finance Ministry's guarantee for its planned bond issuance worth up to 10 billion baht as part of its business rehabilitation plan, says president Manoonrat Lertkomolsuk.
The bonds, sized between 5 and 10 billion baht, are expected to be allocated early next year, said Mr Manoonrat.
The bond offering is aimed at increasing the state-owned bank's liquidity after its capital was halved to 5 billion baht as high non-performing loans (NPLs) were required to be set aside as provisions, said chairman Pichai Chunhavajira.
The SME Bank has struggled with high NPLs for years, and the Finance Ministry appointed Mr Pichai to oversee the rehabilitation plan to reshape its operations and lower bad loans.
Mr Pichai said a Finance Ministry guarantee on SME Bank bonds would lower interest costs.
The bonds' maturity will be five to seven years to match the bank's loan terms, he said, adding it is the right time to issue bonds due to low interest rates and excessive liquidity in the financial market.
Mr Manoonrat said the bank is on track to reduce its bad loans as planned by selling non-performing assets (NPAs) worth 2 billion baht to Sukhumvit Asset Management (SAM) and rehabilitating bad loans worth 1 billion baht per month on average.
At the end of September, the bank had NPLs amounting to 31 billion baht, or 34% of its outstanding credit, while it plans to lower NPLs to 28.85 billion baht or 29-30% of lending by the year's end.
The bank's loans extended under government projects are turning sour at a rate of 200-400 million baht a month.
Some 1.8 billion baht worth of loans extended under government projects are classified as NPLs.
Mr Manoonrat forecast the bank's outstanding credit this year will fall short of its 115-billion-baht target by 10 billion as some debtors have paid back their debt, averaging 1.5 billion baht per month.
The bank's outstanding loans amount to 91 billion baht. Net profit this year is projected at 500-600 million baht. At the end of September, it posted a net profit of 200 million.
The bank's capital adequacy ratio, which stands at 7% of risked-weighted assets, is expected to meet the central bank's minimum requirement of 8.5% if the Finance Ministry injects an additional 2 billion baht into the bank for recapitalisation, he said.