SME Bank seeks to unload B10bn in NPLs
The state-owned Small and Medium Enterprise Development Bank of Thailand (SME Bank) aims to dispose of 10 billion baht worth of bad loans this year, hoping to lower its non-performing loan (NPL) ratio to 10% at most.
The bad-loan divestment is expected to go before the bank's board for approval by October, with the transaction occurring by December, said president Mongkol Leelatham.
The debt can no longer be restructured after having gone through the process several times, he said, adding that some of the debt was restructured 28 times.
The 10 billion baht in debt includes 6 billion baht in bad loans extended to 160 large debtors, the collateral of which is worth about 9 billion baht, Mr Mongkol said.
He said earlier that the bank wants to lower its bad loans to 10% of outstanding loans as soon as possible to prepare for the International Financial Reporting Standard 9 (IFRS9), though the new accounting standard's implementation will be pushed back for one year to 2020.
The major change in the new standard is the expected credit loss impairment model, which requires forecasting for possible loss of credit, rather than the incurred loss model in IAS39.
The change will require banks to put aside higher loan-loss provisions.
Mr Mongkol said the bank is able to not only fetch income but also reverse credit-loss provisions to capital following the bad loan's divestment.
The loan sales will help the bank easier achieve its target to keep bad loans within 10%, Mr Mongkol said.
SME Bank's NPLs stand at 16-17% of loans outstanding.
Regarding the state-controlled bank's plan to issue additional bonds worth 7 billion baht by the October-December quarter, Mr Mongkol said the fund-raising plan will address the bank's fund mismatch problem as the funding source is derived from short-term loans, while loan maturity is long.
But the longer-term bond adds 10 basis points to cost of funds, from 1.4% at present to 1.5%.
The bank plans to offer 2 billion baht worth of bonds next year to match long-term loans and maintain the interest rate amid the upward rate trend, he said.
In the meantime, SME Bank and the University of the Thai Chamber of Commerce (UTCC) found in a recent survey on SME access to government policy that mid-sized business operators paying taxes correctly have learned more about the government's aid measures than small ones have.
Moreover, the survey, with 1,200 respondents, found that SMEs that participated in the government's schemes, including low interest rate loans, and training on marketing and technology have a 13% increase in sales on average, 9.18% lower costs, a 7.36% decline in liabilities, and 10.9% more buying orders.