The state-owned Krungthai Bank (KTB) is gearing up to support the government's 2-trillion-baht infrastructure projects through its full array of financial services.
With a strong capital-adequacy ratio of about 15% of risk-weighted assets, the bank can provide financial support directly to both the government and private customers involved in state infrastructure projects.
KTB's loans to the government sector accounted for 11-12% of its outstanding credit of 1.53 trillion baht at the end of last year.
Thailand's second-largest bank by assets can offer loans and advisory services for debt and capital market instruments, depending on customers' needs and the bank's suitable income, said president Vorapak Tanyawong.
Interest rates charged on government loans are normally lower than for commercial loans.
Fee-based financial services will be another source of revenue from the government projects.
The bank plans to expand its fee-based revenue ratio to the same level as that of other large banks, to 25-30% from about 18% now.
"We can deny a government project if it does not contribute reasonable revenue to the bank, as we're also committed to taking care of other relevant parties as a listed company on the Stock Exchange of Thailand," Mr Vorapak said.
KTB, 55.07% owned by the central bank's Financial Institutions Development Fund, expects to enlarge its state loan portfolio by partly financing the 2-trillion-baht infrastructure projects.
The projects will also benefit other local banks due to the huge amount of funding needed.
Both local and foreign financial institutions have met with the government to receive information about the investment, but details have not been finalised.
"The infrastructure project investment will benefit the overall Thai economy following an absence of government investment over the past six or seven years due to several risk factors, both local and international, particularly the country's political turmoil and the global economic crisis," Mr Vorapak said.
"Thailand's investment-to-GDP ratio is fairly low now."
With the infrastructure projects in the pipeline, public debt will not exceed 50% of GDP. The level was 44.1% as of Jan 31.
Mr Vorapak said KTB's asset quality will not deteriorate as a result of funding the government projects, unlike two state-run specialised banks _ the Small and Medium Enterprise Development Bank of Thailand and the Islamic Bank of Thailand.
Given stringent risk management under Bank of Thailand regulations and a different customer base from those two banks, KTB will retain its asset quality, he said.