The Small and Medium Enterprise Development Bank of Thailand (SME Bank) set a zero-growth target for 2013, reflecting in part the management turmoil that has preoccupied the state-owned bank over the past year.

Executive chairman Pichai Chunhavajira said SME Bank's new loan target for next year is 26 billion baht, unchanged from the target this year.

"The bank isn't looking to accelerate lending next year but instead will push growth from 2014 going forward," said Mr Pichai.

From January-August, SME Bank extended 20 billion baht in new loans or 3-4 billion under target.

Loan quality remains a concern _ a restructuring committee chaired by Mr Pichai estimates non-performing loans at year-end at as much as 30 billion baht or 30% of the bank's current loan portfolio of 98 billion baht.

This compares with a non-performing loan figure of just 15 billion at the beginning of this year, and an estimate of 22 billion following a review based on central bank criteria.

SME Bank has been plagued by controversy over the past year, culminating last month after the bank's board unanimously voted to fire Soros Sakornvisava as president for actions causing an estimated 311 million baht in losses for the bank.

Mr Soros also faced allegations that under his stewardship, SME Bank made questionable lending and procurement decisions contributing to further losses.

SME Bank's restructuring plan estimates it could take three years to clear up bad loans.

Mr Pichai said the plan calls for problem loan customers to be reclassified and legal action taken for distressed loan cases to allow the bank to seize collateral assets to recoup losses.

SME Bank's capital adequacy ratio is also a problem, with capital of just 5.6% of risk assets compared with the central bank's minimum requirement of 8.5%.

Mr Pichai said the bank posted a loss of 2.2 billion baht for the first eight months of thIS year, with an interest spread of just 1.6%, insufficient to cover expenses once interest costs and reserve requirements are included.

"SME Bank must seek ways of increasing its interest spread while also cutting expenses as much as possible," he said.

Mr Pichai said some loan programmes such as a five-year, 5% fixed-rate loan offered during the economic downturn simply made no economic sense for the bank.

"SME Bank has no goal of maximising profits per se, but at the same time it must be able to stand on its own [financially] in order to survive," he said.