CIMB Thai Bank proposes rights issue for business growth

Stocks and Financial Services Press Releases Friday January 20, 2017 11:24
Bangkok--20 Jan--CIMB Thai Bank
Summary
CIMB Thai Bank ("Bank") proposes a rights issue, backed by strong commitment from CIMB Group, to reinforce its capital position and balance sheet to support business growth.

Plans to raise up to THB 5,505,495,928.00 capital via Rights Offering. 5,505,495,928 of new ordinary shares priced at THB1.00 per share. The Rights Offering will be issued at a ratio of 2 Rights Shares for every 9 existing CIMB Thai shares ("Rights Offering").

Commendable top-line growth in 2016; loss was attributed to higher provisions mainly from rising NPLs in isolated commodities-related industries during the year as well as a general increase arising from the gradual pace of the economic recovery. There are no systemic asset quality issues at the Bank

The Bank has outlined its strategic priorities for 2017 anchored on 5C – Customer, Culture, Compliance, Cost and Capital; and targets a modest loan growth of 5-10% amidst a recovering economy
With concrete plans to grow the business and with stronger controls on asset quality, the Bank is expected to return to profitability in 2017
The Bank remains a strategic platform for CIMB Group to enhance and facilitate cross-border trade flows within the region, given its established presence across ASEAN's major economies.
Capital Increase

Mr. Kittiphun Anutarasoti, President and Chief Executive Officer of CIMB Thai Bank PCL stated that the bank hereby discloses the resolutions made at the Board of Directors' meeting no. 1/2017, held on 19 January 2017, to propose that the shareholders' meeting of the Bank considers and approves the increase in the registered capital of the Bank an amount of THB 2,752,747,964.00 from the current registered capital of THB 12,387,365,839.50 to THB 15,140,113,803.50 by issuing 5,505,495,928 ordinary shares with the par value of THB 0.50 per share ("Rights Shares"), to accommodate the allocation of the newly issued shares to the shareholders proportionate to their shareholding as well as the amendment to Clause 4 of the Memorandum of Association of the Bank to be in line with the increase of the Bank's registered capital.

"As at December 2016, the Bank's BIS ratio and Tier-1 capital at 16.1% and 10.7% respectively were well above regulatory requirement. With the proposed Rights Offering, our BIS ratio will strengthen to 18.5% – thus further reinforcing the bank's capital position and balance sheet going into 2017. Our strategic priorities for 2017 are anchored on the 5 C's – Customer, Culture, Compliance, Cost and Capital. The bank targets a modest loan growth of 5-10%. With the Board's guidance and continued support from CIMB Group, we are confident of returning the bank to profitability in 2017." Mr Kittiphun said.

CIMB Thai will propose that the shareholders consider and approve the allocation of 5,505,495,928 newly issued shares at the par value of THB 0.50 per share to the existing shareholders proportionate to their shareholding (Rights Offering) at a ratio of 2 Rights Shares for every 9 existing CIMB Thai shares, at the offer price of THB1.00 per share. The date for the Extraordinary General Meeting of Shareholders has been scheduled for 24 February 2017.

If there are any remaining shares from the first allocation to the existing shareholders, the Bank will allocate such remaining shares to the existing shareholders who wish to subscribe to the newly issued shares in excess of their entitlement, at the same price as that of the shares to be allocated.

Tengku Dato' Sri Zafrul Aziz, Group Chief Executive, CIMB Group said, "Given the gradual pace of economic recovery in Thailand and challenging operating conditions, CIMB Thai recorded elevated loan provisions in Q4FY2016. We are confident, however, that CIMB Thai can return to profitability in 2017 and we are fully supportive of CIMB Thai's business plans, including the rights issue announced today.

Thailand has great growth potential and the country remains a strategic platform for us to enhance and facilitate cross-border trade flows within the region, given CIMB Group's established presence across ASEAN's major economies.".

FY2016 Financial Results

According to the unaudited financial results for the year ended 31 December 2016, CIMB Thai group's consolidated operating income rose by THB 694.1 million or 5.7% year-on-year ("YoY") to THB 12,928.1 million, derived from a 16.4% growth in net interest income and a 11.4% expansion in net fee and service income, while other income dropped by 37.7%. Pre-Provision Operating Profit increased 7.8% YoY to THB 5,504.6 million with a lower growth in operating expenses of 4.2% YoY.

However, net loss was THB 629.5 million for the year 2016, compared to net profit of THB 1,052.5 million in 2015, as a result of a 66.6% increase in provisions. The increase in provision was mainly from rising NPLs in certain industries during the year as well as those arising from the gradual pace of the economic recovery.

On a YoY basis, net interest income increased by THB 1,388.7 million or 16.4%, resulting from a decrease in interest expenses by 21.8%. Net fee and service income increased by THB 167.9 million or 11.4%, mainly due to higher hire-purchase and financial lease fees and insurance premiums. Total other operating income decreased by THB 862.6 million or 37.7% mainly from lower treasury business activities.

For the year ended 31 December 2016, operating expenses increased by THB 296.2 million or 4.2% YoY from higher other expenses but partially offset by lower premises and equipment expenses. The cost to income ratio improved to 57.4% in 2016 compared to 58.3% in 2015 as a result of better cost management and increased income.

Net Interest Margin (NIM) over earning assets stood at 3.77% in 2016, compared to 3.27% from 2015, as a result of more efficient funding cost management.

As at 31 December 2016, total gross loans (inclusive of loans guaranteed by other banks and loans to financial institutions) stood at THB 206.4 billion, marking an increase of 3.7% from 31 December 2015. Deposits (inclusive of Bill of Exchanges, Debentures and selected Structured Deposit Products) stood at THB 223.5 billion, an increase of 2.4% from THB 218.4 billion at the end of December 2015. The Modified Loan to Deposit Ratio was higher at 92.4% compare to 91.2% as at 31 December 2015.

The gross non-performing loans ("NPL") stood at THB 12.7 billion, with an equivalent gross NPL ratio of 6.1%. This is an increase from 3.1% as at 31 December 2015, due to slower repayment ability from borrowers in certain sizable corporate accounts. CIMB Thai continues to exercise high credit risk underwriting standards and risk management policies. The Bank also focuses on improving productivity, monitoring collection and managing all accounts closely and effectively.

CIMB Thai Group's loan loss coverage ratio decreased to 77.3% as at 31 December 2016 from 106.5% at the end of December 2015. As at 31 December 2016, our total provisions stood at THB 9.8 billion showing an excess of THB 3.5 billion over Bank of Thailand's reserve requirements.

Taking into consideration the NPL sale completed in early January 2017, CIMB Thai's proforma gross NPL ratio and loan loss coverage ratio as at 31 December 2016 would be 4.8% and 86.4% respectively.
Total consolidated capital funds as at 31 December 2016 stood at THB 38.0 billion. BIS ratio stood at 16.1%, 10.7% of which comprised Tier-1-capital.

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