It wants to raise RM693mil to reinforce capital position PETALING JAYA: CIMB Thai Bank Pcl, a 93.71% indirect subsidiary of the CIMB GROUP HOLDINGS BHD, has proposed a rights issue to raise 5.5 billion baht (RM693mil) to reinforce its capital position and balance sheet. The second-biggest bank by asset size told Bursa Malaysia that the rights issue, involving 5.505 billion rights shares of one baht each, will be at a ratio of two rights shares for every nine existing shares held. The banking group, which posted net losses in the financial year (FY) 2016 due to higher provisions, has embarked on a strategy in 2015 to bring down cost and increase revenue and returns to shareholders. For 2017, the group has outlined strategic priorities anchored on 5Cs – customer, culture, compliance, cost and capital – and aims a modest loan growth of 5% to 10% amidst a recovering economy. “As at Dec 2016, the bank’s Bank for International Settlement (BIS) ratio and Tier-1 capital at 16.1% and 10.7% were well above regulatory requirement. “With the proposed rights offering, our BIS ratio will strengthen to 18.5%, further reinforcing the bank’s capital position and balance sheet,” said CIMB Thai president and chief executive officer Kittiphun Anutarasoti in a statement. For FY16, CIMB Thai’s consolidated operating income rose by 694.1 million baht or 5.7% year-on-year (y-o-y) to 12.93 million baht, 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, meanwhile, was up 7.8% to 5.504 billion baht with a lower growth in operating expenses of 4.2% y-o-y. “However, net loss was at 629.5 million baht for FY16 compared to a net profit of 1.052 billion baht in 2015, as a result of a 66.6% increase in provisions. “The increase in provision was mainly from rising non-performing loans (NPLs) in certain industries during the year as well as those arising from the gradual pace of economic recovery,” the bank noted. Its net interest income increased by 16.4%, resulting from a decrease in interest expenses by 21.8%. On net fee and service income, the group said this was up 11.4% or 167.9 million baht, mainly due to higher hire-purchase and financial lease fees and insurance premiums. Total other operating income decreased by 862.6 million baht or 37.7% mainly from lower treasury business activities. “For the year ended Dec 31, 2016, operating expenses increased by 296.2 million baht or 4.2% y-o-y 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,” it said, adding that net interest margin over earning assets stood at 3.77% in 2016, compared to 3.27% in 2015, due to more efficient funding cost management. The gross NPL stood at 12.7 billion baht, with an equivalent gross NPL ratio of 6.1%. CIMB Group said this was an increase from 3.1% as at Dec 31, 2015, due to slower repayment ability from borrowers in certain sizable corporate accounts. It noted that it would continue to exercise high credit risk underwriting standards and risk management policies, apart from making 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 Dec 31, 2016 from 106.5% at the end of December 2015. As at Dec 31, 2016, its total provisions stood at 9.8 billion baht, which was an excess of 3.5 billion baht 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 Dec 31, 2016 would be 4.8% and 86.4%. Total consolidated capital funds as at Dec 31, 2016 stood at 38 billion baht. BIS ratio stood at 16.1%, 10.7% of which comprised Tier-1-capital.
CIMB Thai Bank is looking to raise THB5.5bn ($15.5m) in a rights issue to secure its capital position; CIMB Thai is a 93.71% indirect subsidiary of CIMB Group Holdings. The company has been struggling with low interest rates and high debt levels for the past few years, but it recently announced that it will be able to repay all outstanding loans by June 2018.