The Finance Ministry wants to sell shares of Islamic Bank of Thailand (IBank) at a premium after the state-owned bank showed signs of a turnaround.
"Investors who proposed acquisition of IBank's shares offered prices as if they were buying junk, so we plan to improve the bank's financial position ahead of any sales," said Finance Minister Apisak Tantivorawong. "We believe it will not be difficult to do, as the bank is small.
"An improved financial position will allow us to sell the shares at a premium price, and the Finance Ministry will not only get back the money it injected in the bank, but also earn a profit."
Loss-making IBank has long sought new partners, though plans hit a snag as interested investors proposed to acquire the bank's shares at a relatively low price.
The bank is one of six remaining state enterprises under rehabilitation, as it has been saddled with high non-performing financing (NPF) and net losses.
Last year the Finance Ministry pumped funds worth 18.1 billion baht into the bank through a recapitalisation, but the bank's capital adequacy ratio (CAR) is still negative to the tune of 1 billion baht. Upon the capital increase, the ministry's shareholding increased to 100% from 48.5% before the recapitalisation.
Mr Apisak said it's unnecessary for the ministry to hold the entire stake in IBank, so part of the shareholding will be sold after the bank's financial position is strengthened to investors with expertise in Islamic banking and networks.
IBank president Wuttichai Suraratchai recently forecast the bank would deliver an operating profit of 600 million baht and a net profit of 590 million in 2018, marking the first profit in five years.
The bank aims for loans outstanding to grow by 12.5 billion baht in 2019, up from 8 billion last year, while net profit is estimated to jump to 1.08 billion this year. IBank's NPF is expected to fall below 9 billion baht by the end of 2018, dipping to 5% of credit outstanding in the next few years, down from 19-20% at the moment, Mr Wuttichai said.
The bank's NPF plunged significantly after transferring NPF worth 50 billion baht to Islamic Bank Asset Management Co Ltd, which is wholly owned by the Finance Ministry, in return for 22 billion baht in promissory notes.
Mr Apisak said the ministry stands ready to inject new funding into specialised financial institutions to enable them to lend to groups that can't access commercial bank loans.
The capital increase will strengthen their financial position and boost CAR to an appropriate level, he said, adding that people need to trust financial institutions if they're to be desirable places to deposit money.