Will restructure up to B7bn worth of loans
The Small and Medium Enterprise Development Bank of Thailand (SME Bank) is set to restructure 6-7 billion baht worth of loans before they turn sour.
President Manoonrat Lertkomolsook said the state-owned bank is concerned this amount may soon be classified as non-performing loans (NPLs) if no special assistance is rendered.
These troubled loans were extended under the government's cheap loan scheme at 3-5% interest.
The intention was to help operators suffering from the US and the euro-zone debt crisis, Thailand's severe floods in 2011 and the domestic political chaos of recent years.
The troubled loans are expected to be restructured through rescheduling payments and increasing credit lines, said Mr Manoonrat.
For debtors whose loans remain performing but who are facing a liquidity crunch, SME Bank has set up a special team to help them and will offer additional credit to improve their liquidity.
The additional loans will carry interest at the minimum lending rate of 7.25%.
SME Bank's NPLs amount to 31 billion baht or 30% of outstanding credit.
Mr Manoonrat said SME Bank will revamp its organisation by "putting the right man in the right job", separating loans extended under the government's initiative programmes from regular loans, speeding up NPL problem solving, extending loans to achieve set targets and investing in a core banking system.
The bank's capital-adequacy ratio is at 5% of risk-weighted assets, based on Bank of Thailand loan-loss reserve requirements.
However, the ratio is 7.5% if loans under the government's initiative scheme are excluded.
The Finance Ministry has completely subscribed to SME Bank's first phase of its 555-million-baht recapitalisation plan.
The ministry expects to pump another 2 billion baht into SME Bank this year provided its NPLs fall to 29%, outstanding loans increase to 101 billion baht and net profit amounts to 375 million baht.
SME Bank plans to seek the permission from the Finance Ministry and the Bank of Thailand to write off 800 million baht worth of NPLs this year, said Mr Manoonrat.
He said the bank's NPLs could drop below 30% if loan extensions meet the target and NPLs do not increase, he said.
SME Bank has set a loan growth target of 27 billion baht.
Net new loans have increased by only 5 billion baht year-to-date, but another 7.1 billion are awaiting approval.
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