Fitch will likely upgrade the Support rating to '3' if CIMB acquires a majority stake, through the tender offer, and completes the capital raising, subject to a further review of CIMB's strategy, brand-name association and long-term support for BT.
BT's overall performance remains weak, with results in 2008 affected by further large mark-to-market (MTM) losses on CDO investments. The bank reported a THB1bn loss for 9M08, following a net large loss of THB6.9bn in 2007 due to MTM losses on CDO investments and large provisioning on bad and doubtful loans. While margins remain at about 3%, revenues declined due to the bank's shrinking investments and loan book.
At end-July 2008, BT sold all of its investments in CDOs and realized a gain on the disposal of THB970m in Q308. Accumulated losses on revaluation up to the disposal date were about THB7.0bn (or 82% of cost), of which THB2.9bn was recognized in H108.
BT still has significant exposure to other foreign securities of THB14.0bn, equivalent to about 7% of assets, which mostly comprise sovereign notes and securities issued by financial institutions in developed markets. Given the stress on banks and sovereigns in the US and Europe, these securities could be subject to MTM losses, if credit markets continue to deteriorate.
BT's impaired loans stood at THB14.1bn or 15.1% of total loans at end-September 2008, a slight decline from THB 14.4bn (14.7%) at end-2007, due to the sale of non-performing loans in H108. Loan loss reserves of THB10.0bn or 73.5% coverage, appear to be in line with its local peers.
Fitch estimated BT's Tier 1 capital and total capital ratio to be at 3.0% and 4.5% of risk-weighted assets, respectively, at end-June 2008, which were below minimum regulatory requirements. CIMB plans to inject up to THB6bn of equity into BT which should increase the latter's total capital to between 13 and 15%.
CIMB Group Sdn Bhd (CIMB Group) is Malaysia's second-largest financial services group and holds 99.99% of CIMB, which is one of their main subsidiaries. The ultimate holding company of CIMB Group is the listed Bumiputra-Commerce Holdings Berhad (BCHB). Malaysian government entities, including Khazanah, the government's investment arm, hold a combined 46% stake in BCHB. CIMB Group has expanded regionally in recent years, with a 78% stake in Indonesia's PT Bank CIMB Niaga and a proposed 19.99% stake in China's Bank of Yingkou. In 9M08, BCHB reported a net profit of USD0.5bn, with assets of over USD54bn.
Contacts: Vincent Milton, Bangkok, Tel: +662 655 4759; Darunee Peanmanakit, Bangkok +662 655 4752.
Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email: [email protected]; Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: [email protected].
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