The state-owned Small and Medium Enterprise Development Bank of Thailand's (SME Bank) planned 4-billion-baht recapitalisation will enable the bank to extend an additional 40 billion in loans, its chief says.
The capital increase plan will top the agenda at the bank's board meeting on Friday, and it is expected to be completed by the fourth quarter of 2019, said president Mongkol Leelatham.
The recapitalisation is in accordance with the cabinet's recent resolution and the government will use money from the Specialized Financial Institutions Fund (SFIF), contributed by all specialised financial institutions based on their deposits.
SME Bank has registered capital of 20 billion baht.
The capital increase will not only grow the bank's loans but also boost capital adequacy ratio to 13% of risk-weighted assets from 11%, he said. Proceeds from the recapitalisation will be used to build up loan-loss credit to prepare for the implementation of Thai Financial Reporting Standard 9, scheduled from January 2020.
The state-run bank aimed for 60 billion baht loan target next year, he said, adding this year's target at 32.5 billion is achievable.
Disposal of non-performing loans (NPLs) worth 4-5 billion baht will also be presented for the bank's board approval.
SME Bank will continue to divest bad loans next year.
The bank is speeding up the sale of soured loans worth 2 billion baht, including a golf course in Phetchaburi province through the Legal Execution Department. The bank is in the midst of negotiations with a debtor who owes 1.5 billion baht for debt restructuring, he said.
If the bad debt can be sold out and the debt can be restructured, the bank's NPLs will fall to below 10% in 2019, faster than the 13.5% previously targeted, said Mr Mongkol.
The NPL ratio stands at 17%, while a mere 0.06% of new loans are turning sour.
He forecasts the bank will manage to deliver operating profits of 2 billion baht this year and almost all of them will be set aside as impairment charges for loan losses to build up the buffer.
The bank was once among seven state enterprises under rehabilitation. The others are Thai Airways International, the State Railway of Thailand, the Bangkok Mass Transit Authority, TOT Plc, CAT Telecom and the Islamic Bank of Thailand.
SME Bank suffered a net loss of 4.03 billion baht in 2012 before rallying back to a net profit of 396 million in 2013 and 457 million last year.