Information on Key bank bad loans

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Siam Commercial Bank president and CEO Khunying Jada Wattanasiritham has vowed to continue the bank's focus on loan "quality, not quantity", despite falling profits in the face of stalling loan demand in Thailand.

Siam Commercial, the country's No.4 bank, saw its third quarter profit fall 33 per cent from the same period last year. It earned 503 million baht (US$11.2 million) in the three months to September, compared with 754 million baht last year.

Loan demand, particularly in the crucial commercial sector, remains stagnant, with companies shying away from new investments due to tightening economic conditions and an oversupply of manufacturing and office space capacity.

Jada says despite Siam Commercial having the unusual problem of "having too much money and no-one to lend it to", the bank would not lower its newly tightened credit standards.

"Quality for us is No. 1 -- growth is No.2," she said. "We face the somewhat worrying problem of having our best borrowers not wanting to use our services (because of economic conditions). We not only have this problem with too much money, but we now have to find ways of putting this money to better use when are we are left with are smaller and therefore riskier customers.

"Despite this, we need to retain a cautious approach when it comes to lending."

Siam Commercial recently lowered its interest rates in an attempt to boost flagging demand. It cut its prime lending rate to 7.5 per cent this month, down a quarter percentage point -- making it the first Thai bank in nine months to cut interest rates.

The banks cautious approach will please investors eager to see continued falls in Siam Commercial's non-performing loans (NPL) ratio. NPLs have been steadily falling at Siam Commercial and other Thai lenders, who saw NPLs at the height of the Asian financial crisis rise to about 50 per cent of all loans.

Siam Commercial, however, has hit a bump, with Jada saying her earlier predictions of achieving an NPL ratio of 15 per cent by year's end may not be met. The bank's bad debts may only reach 17 per cent by the end of 2001.

Jada says Siam Commercial managed to claw its way back from the sector's dire situation through judicious streamlining of services and operations.

GRADUAL IMPROVEMENT

NPLs (loans at least three months in arrears) at Thailand's major
banks. The NPL figures are in billions of baht.

                       Oct 2001   Sept 2001   Aug 2001   July 2001

Bangkok Bank            116.45      131.1      134.4      134.72
(% of total loans)       15.72       17.15      17.52      17.38
Krung Thai Bank          56.45       72.66      64.98      68.35
(% of total loans)        7.36        9.33       8.03       8.55
Thai Farmers Bank        64.03       68.18      68.04        na
(% of total loans)       13.16       13.96      13.84        na
Siam Commercial Bank    100.66      105.6      106.89     105.98
(% of total loans)       21.39       21.95      22.15      22.18

Source: Bloomberg