Tmb Nearly Bankrupted

[yeti]

This bank is virtually… bankrupted… “In the nine-month period, its net loss was Bt20,687 billion compared to the net profit of Bt4,6 billion in the same period last year”.

Their only chance was to massively recapitalize…

Well, they did it. And not by half of the spoon ! TMB announced this morning that they would increase the capital from “186 billions Baht to 437 billions by issuance of 25 billions shares at par value of Baht 10” !

And in the same time, the resolution says : “approved the allocation of 25 billions ordinary shares resulted from the capital increase, priced at Baht 1.40, which is below par value of the Bank’s shares, as currently the Bank’s operational result is still in red“.

Continued here.

Time to close all accounts with this bank?

[Losangels]

Govt bail out thorugh the Finance Ministry

[Mid]

some one has to pay for the recent shenanigans .............................

[PeaceBlondie]

No corporation is bankrupt merely because this year's earnings are negative. It is a matter of net worth. The Bank of England may have been bankrupt by 1945.

[sonicdragon]

TMB is one of the worst managed banks in south-east asia. I have heard stories ranging from it being a cash machine for the army (ie making loans for which there are no plans of repayment) to straigtforward ineptitude in the credit appraisal process. All their credit quality ratios look appalling and that's even with overstated book values !

That said, there isn't much chance of them going out of business, but I wouldn't want to be a minority shareholder !

[cclub75]

Govt bail out thorugh the Finance Ministry

Indeed.

There is absolutly no risk.

And furthermore, we need to remember the complete name of that "bank" : "Thai MILITARY Bank".

That helps a lot.

However, and seriously, I don't understand how come ING (dutch bank) could really be willing to invest into TMB.

As the article said, DBS from Singapore has burned itself with TMB (they had 22 % of shares).

[cclub75]

No corporation is bankrupt merely because this year's earnings are negative. It is a matter of net worth. The Bank of England may have been bankrupt by 1945.

Sure. But when you increase x2,3 your capital... for a total amount of 2/3 of your "assets", some people could assume, just assume, that your 646 billions of "assets" (loans) might no be... of a high quality !

US have "subprime". TMB might have "the loan for the business of my stepbrother, who is colonel" and that kind of things.

And it's a bit like Northern Rock... When nobody wants to put money on the table...

And apparently, TMB has already postponed its recapitalization.

So the only solution they have : big discount of the new shares issued ! In order to lure any investor.

And furthermore, it's not the first year of deficit for TMB... -12 billions in 2006, -14 billions in 2003 etc.

Look here.

Edited October 20, 2007 by cclub75

[jbaldwin]

Govt bail out thorugh the Finance Ministry

Indeed.

There is absolutly no risk.

And furthermore, we need to remember the complete name of that "bank" : "Thai MILITARY Bank".

That helps a lot.

However, and seriously, I don't understand how come ING (dutch bank) could really be willing to invest into TMB.

As the article said, DBS from Singapore has burned itself with TMB (they had 22 % of shares).

I think that one of the reasons that ING is interested in buying is because the bank has been badly managed. They will pay price that is based on its current value based on current trading and not, the much higher, potential value if management improvements lead to better preformance in the future.

Generally it is badly managed not well managed banks that are taken over. In the UK Abbey National was widely regarded as the worse managed and poorest preforming bank and it is now the only major UK bank that it now under foriegn ownership.

I also beleive that another attraction for ING will be to use TMB's branch network as a distribution channel for its mutual funds business.

[naka]

Govt bail out thorugh the Finance Ministry

Indeed.

There is absolutly no risk.

And furthermore, we need to remember the complete name of that "bank" : "Thai MILITARY Bank".

That helps a lot.

However, and seriously, I don't understand how come ING (dutch bank) could really be willing to invest into TMB.

As the article said, DBS from Singapore has burned itself with TMB (they had 22 % of shares).

They sold a bunch of them and as of today they have only 6% !

Naka.

[cclub75]

The saga shall continue...

"Tough times at TMB despite capital hike

The worst is not over for TMB, even though it is expected to see a capital increase of Bt35 billion, including about Bt18 billion from new strategic partner ING Group. " (Nation)

I like especially this quote : "Next quarter there may be another huge provision in another attempt to clean up its mess before ING moves in. With the expected huge dilution from the significantly discounted recap price, we still believe that TMB's risk is far greater than its expected return," KGI said in its report. The securities firm recommended "underperform" for TMB.

"Underperform" ? That's a rather... understatement !

Edited October 22, 2007 by cclub75

[Pattayatony]

This bank is virtually… bankrupted… “In the nine-month period, its net loss was Bt20,687 billion compared to the net profit of Bt4,6 billion in the same period last year”.

Their only chance was to massively recapitalize…

Well, they did it. And not by half of the spoon ! TMB announced this morning that they would increase the capital from “186 billions Baht to 437 billions by issuance of 25 billions shares at par value of Baht 10” !

And in the same time, the resolution says : “approved the allocation of 25 billions ordinary shares resulted from the capital increase, priced at Baht 1.40, which is below par value of the Bank’s shares, as currently the Bank’s operational result is still in red“.

Continued here.

Time to close all accounts with this bank?

I have just been given so info by an employee at TMB and they are saying it might only last about another year. So get your money out now, I know I have.

Cheers Tony

[cclub75]

I have just been given so info by an employee at TMB and they are saying it might only last about another year. So get your money out now, I know I have.

Again, at that point, it's unlikely.

We need first to know if ING (dutch bank) is coming onto the boat...

I will believe it when it will be official.

Anyway.

But if ING is walking away from the deal... then yes, if will be time to open the parachute...

[samran]

I have just been given so info by an employee at TMB and they are saying it might only last about another year. So get your money out now, I know I have.

Again, at that point, it's unlikely.

We need first to know if ING (dutch bank) is coming onto the boat...

I will believe it when it will be official.

Anyway.

But if ING is walking away from the deal... then yes, if will be time to open the parachute...

you are about a week too late. They came on last week, buying 26% of the bank at 1.75 baht per share or something like that. MOF will also inject some funds shortly.

As others have said though, it is a dog of a bank. ING want in though as it is cheap and it gives them access to branches for the investment products.

[cclub75]

you are about a week too late. They came on last week, buying 26% of the bank at 1.75 baht per share or something like that. MOF will also inject some funds shortly.

As others have said though, it is a dog of a bank. ING want in though as it is cheap and it gives them access to branches for the investment products.

You are wrong Samran.

Read the resolutions from the board (here file PFD). Or here (SET website).

Another board meeting is scheduled on november 6.

"A. The Bank will call another Board of Directors Meeting in order to

acknowledge and consider the details of the Bank’s new strategic

partner and other entity(ies) in the same group as the New

strategic partner of the Bank after reaching the firm business

agreement with the New strategic partner."

The deal is not closed. Therefore, as I said, we have to wait.

[samran]

cclub,

thanks for the heads up. Though it would be a technicality, would it not?

The deal was announced publically last week. I'm assuming that meeting will be a formality. Given that DBS is desperate to sell down, and that the MOF is a major shareholder, the deal is as sure a thing as a nana-plaza pickup with 2000 baht in your pocket.

[cclub75]

thanks for the heads up. Though it would be a technicality, would it not?

Well, it could.

But again, this "bank" is such a "unknown banking object" if I may say, that we could have more bad news.

Regarding the provisions, here is an article in Nation. A security firm is also talking about "further" bad news and more provisions for the next quarter.

In thoses conditions, a Z-turn could be possible. Furthermore, you'll notice that ING didn't say a word. All the news are coming from the thai side. Make a research on google news. Reuters is speaking about ING "for the end of this year"...

"The bank did not identify the new investor, but Finance Ministry Chalongphob Sussangkarn has said he expected TMB to complete a deal with Dutch financial group ING (ING.AS: Quote, Profile , Research) by the end of this year."

Thais love to announce deals. Look for instance with JBIC. 2 weeks ago, MOF said that the JBIC agreed to give a loan for the train line... Well, now... they are talking about a loan from... the chinese.

In such situation (hot hot), you take the time to put armed concrete in your deal, to secure it. And certainly not to issue a very strange board resolution... calling for another meeting 2 weeks after in order to reveal the name of the "strategic partner", when the deal will be closed.

Last point : Reuters gives a very interesting detail.

"TMB allowed ING to start due diligence on its financial position in late August, a banking official said, after talks with DBS Group failed due to TMB's huge losses from extra loan-loss provisions."

Now, you know why we can be... cautious.

Due diligence in TMB ? They are going to have a hel_l of a time !

[torrenova]

Doesn't Thailand still have a bank guarantee which was unlimited and they were trying to phase out ? Getting it down to a million then 100,000 or something.

Sure I read something a few months ago but cannot place where. Probably around the 10th anniversary of the run on the THB.

[cclub75]

It's good to be good.

Some fresh news.

Trading of TMB was suspended this morning.

"Since the company has requested the SET to temporarily

suspend trading in its securities. This is because the bank had received

a new proposal from another group of strategic investors.Since the material

information which may affect the share prices of the Bank or the investment

decision of shareholders or investors in general."

The meeting of the board scheduled on november 6 (to announce the identity of the "strategic partner") has been postponed today afternoon.

So to summarize the situation :

-mid october : TMB makes a huge recapitalization operation (increase capital, issue new shares) in order to prepare the arrival of (allegedly) the dutch bank ING...

-today : they will announce... that they received a "new proposal" from somebody else ? !!!

Sorry, but it sounds like a bad scenario....

[Manchester]

Account closed today. No way are they gonna keep my 500 baht.

Edited November 7, 2007 by Manchester

[Tyke]

No corporation is bankrupt merely because this year's earnings are negative. It is a matter of net worth. The Bank of England may have been bankrupt by 1945.

I'm still confused how deposits will be OK if the bank flops -

how do we know that the net worth of the bank will save customers deposits?

Isn't there a link between the stability of the bank and its assets (ie. deposits?).

Won't customer's deposits be used to pay off creditors if the bank does flop - after all aren't they used to finance their debts in the first place?

Suppose most depositors decide to withdraw their deposits all at once - leading to a run on the bank - what would happen to the deposits of those who leave their cash in?

[ilyushin]

[sonicdragon]

No corporation is bankrupt merely because this year's earnings are negative. It is a matter of net worth. The Bank of England may have been bankrupt by 1945.

I'm still confused how deposits will be OK if the bank flops -

how do we know that the net worth of the bank will save customers deposits?

Isn't there a link between the stability of the bank and its assets (ie. deposits?).

Won't customer's deposits be used to pay off creditors if the bank does flop - after all aren't they used to finance their debts in the first place?

Suppose most depositors decide to withdraw their deposits all at once - leading to a run on the bank - what would happen to the deposits of those who leave their cash in?

In this case, I think the government would have to completely nationalise the bank, and depositors money would be safe. the alternative would lead to massive unrest - not what the doctor ordered at the best of times, let alone with elections looming. Oh hang on a minute - I can feel a conspiracy theory coming on.......

But why take the risk, right ? It's precisely this chain of thought that causes runs on banks. They are inevitable from time to time, and very nasty.

FYI my wife closed her account there very recently.

[samran]

DBS-Deutsche outbidding ING....

[yeti]

ING poised to buy 25.2% TMB stake

Last-minute offer by DBS turned down

ING Groep NV will take a 25.2% stake in TMB Bank, beating out a last-minute bid from Singapore's DBS Group. Netherlands-based ING yesterday agreed to increase its offer to 1.60 baht per share, or 20 satang higher than its original proposal, said sources familiar with the deal.

The bid matched a late offer made by DBS and Deutsche Bank. But TMB directors agreed to the ING deal, following weeks of talks between the two sides.

Subhak Siwaraksa, the TMB chief executive, last night declined to name the winner, pending a formal report to the Bank of Thailand and stock market today.

''We opened bids from the two investor groups at 4:30 pm. We looked at the price and the benefits offered to the bank and shareholders,'' Dr Subhak said.

''If the price was the same, we looked at the ability of each group to help us develop our products and market.''

TMB chairman Somchainuk Engtrakul said directors chose the proposal offering maximum benefits to the bank.

''The price [of the share offering] is higher than before, which will certainly benefit existing shareholders,'' he said.

Dr Subhak said the bank would hold an extraordinary shareholders' meeting on Nov 27 to approve the deal. The funds are to be paid by mid-December.

The new pricing will give TMB at least 40 billion baht based on the terms of the capital-increase plan it announced on Oct 18. It called for the bank to float 25.1 billion new shares at 1.40 baht each, raising 35 billion baht. Registered capital would rise to 437 billion baht from 186 billion based on 10-baht par value.

The bank said a new strategic investor would be allocated 10.97 billion new shares and existing shareholders 11.88 billion. Another 2.14 billion shares would be floated in non-voting depository receipts (NVDRs). The share register to attend the Nov 27 meeting and subscribe to the rights offering closed yesterday.

ING will hold 25.2% in TMB, with its partners another 4.92% through NVDRs. ING has also sought the right to lift its shareholding to up to 35% within two years, and the same number of seats on the TMB board as the Finance Ministry.

The investment gives the European financial services giant more channels to market its retail services through ING Life and ING Mutual Fund.

Finance Minister Chalongphob Sussangkarn said the TMB board had sought a deal offering maximum benefits to shareholders. ''The timetable for the capital increase remains on track. TMB will receive the funds by the end of the year.''

Dr Chalongphob said price was just one issue, and that management change ''was not necessarily a requirement''.

The Finance Ministry will exercise its rights to the new shares to keep its holding at 26.11%. DBS, if it declines to subscribe to the new shares, will have its holding diluted to 6% from 18%.

Areepong Bhoocha-oom, the director-general of the State Enterprise Policy Office, said the ministry would finance its share subscription by selling existing shares in state enterprises such as MCOT Plc to the Government Savings Bank.

Based on the original 1.40-baht price, the ministry would have to pay 7.82 billion baht for 5.586 billion shares.

The last-minute DBS proposal would have lifted the Singaporean bank's holdings in TMB to 25.2%, with Deutsche Bank holding another 10%, strictly as a financial investor committed for five years, according to sources.

DBS in September had ruled out committing new funds to TMB. ''Unfortunately, we did not receive adequate assurance that we would have sufficient management control to effect the business and operational changes necessary to improve TMB's performance,'' it said at the time.

DBS, which took a shareholding in TMB through the 2004 merger between the then-Thai Military Bank, the Industrial Finance Corp of Thailand and DBS Thai Danu Bank, booked a S$159 million impairment charge for its investment in the Thai bank in the first half.

TMB shares last traded on Tuesday at 1.58 baht, or around 1.4 times book value. Trading was suspended yesterday on the SET at the bank's request.

So basically they chose the investor which didn't ask for the managers to be fired...

And Thai government will spend nearly 8 billion bahts of tax payers money so that the army can keep a bank at their disposal.

[samran]

ING as I've read it mainly want the branch network to distribute their products, while DBS is more interested in havnig a banking presence, and they need a license to do so, which TMB has. The license is valuable, which is why DBS eventually had a second shot.

Yes the management at TMB is bad, and there is pressure for some management to go. But as always, noone in Thailand ever gets sacked. If anything is going to happen, they'll be moved elsewhere.

[Misty]

As I recall the Bank of Thailand's FIDF has had a blanket guarantee on all bank deposits in Thailand since the baht crisis in 97 or thereabouts. It's supposed to be lifted when the legislation for Deposit Protection Insurance is passed, but that legislation has been delayed until next year.

That's as I remember it, but maybe someone else can clarify or update this...

I'm still confused how deposits will be OK if the bank flops -

how do we know that the net worth of the bank will save customers deposits?

Isn't there a link between the stability of the bank and its assets (ie. deposits?).

Won't customer's deposits be used to pay off creditors if the bank does flop - after all aren't they used to finance their debts in the first place?

Suppose most depositors decide to withdraw their deposits all at once - leading to a run on the bank - what would happen to the deposits of those who leave their cash in?

[cclub75]

We could say : it's like the subprime drama in the USA...

Each and every quarter... more write-offs.

TMB lifting provisions BANKING :TMB Bank says it will set aside additional loan-loss provisions of 25 billion baht in the fourth quarter. (Bangkok Post)

On the 9 first month of 2007, TMB had a revenue of 32,2 billions THB (and a loss of 20,6)...

Anyway, tuesday TMB has the shareholder meeting regarding the new "strategic partner" ING and the recapitalization plan.

Details on SET (SET) : "In consultation with ING Bank N.V. ("ING"), the Board of Directors of

TMB Bank Public Company Limited announced today that as part of the

recapitalization plan, the bank shall be raising its loan classification

standard and provisioning policy to be more in line with International

standards and other leading Thai commercial banks. In addition, the bank has

also approved a plan to accelerate the sales of NPLs and foreclosed properties."

"To be more in line with international standard". I love that.

Poor dutch... they're going to have a very hard life...

Edited November 25, 2007 by cclub75