Thailand's Financial Institutions Development Fund has proposed a merger between ailing Siam City Bank and BankThai, two government-owned banks, reports said Wednesday.
The fund recommended the merger of the two state-owned banks as offering the best chance of maintaining the asset quality of Siam City's weak loan portfolio, said Chakthip Nitibhon, an assistant governor of the central Bank of Thailand, according to the Bangkok Post.
The proposal had been forwarded to the finance ministry for consideration, Chakthip said.
Finance Minister Tarrin Nimmanahaeminda would make the final decision on the merger proposal, Chakthip added.
Siam City's non-performing assets, which account for roughly sixty percent of its portfolio, would be transferred to a separate asset management company owned by the development fund.
Siam City's non-performing loans totaled 140.86 billion baht ($3.35 billion), or 59.46 percent of its total loan portfolio, as of July 31, according to figures released Friday.
The merger, if approved, would boost BankThai's asset base and branch network, the Post said.
Siam City has 210 branches and BankThai now operates a lean 78-branch network following the closure of 39 branches over the past two years.
Siam City Bank employees Tuesday protested outside Government House against the merger proposals, saying the bank should be kept as a separate entity.
The country's banking sector is mired in massive debts accrued by profligate lending and borrowing in Thailand's boom years of the late 1980s and early 1990s.
BankThai is itself the result of the 1998 financial restructuring program, emerging from a merger of 12 finance firms, Krungthai Thanakit and Union Bank.
As of August 31, BankThai's NPLs stood at 158.93 billion baht, or 67.19 percent of its total loans.
NPLs were expected to fall below 20 percent of total loans by the end of the year, Bank of Thailand governor Chatu Mongol Sonakul said last week.—(AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
