BBL tier one back to normal

Bangkok Bank (BBL) expects tier-one capital will return to a normal ratio of 18% this year after issuing adequate tier-one capital (AT1) last month.

Bangkok Bank’s headquarters on Silom Road. In June, BBL’s capital-adequacy ratio was 16.6%, of which 14% was tier-one capital.

The capital buffer should be sufficient to cope with the prospects of higher non-performing loans (NPLs) and economic uncertainties for the next three years, said executive chairman Deja Tulananda.

The banking sector faces a higher likelihood of rising bad debts because of the economic downturn caused by the pandemic.

The bank’s tier-one capital rate is around 17.5% and the ratio will increase to 18% by the end of this year, supported by retained profit, he said.

BBL expects to be able to manage higher uncertainties for the next three years based on its solid capital buffer, in line with the Bank of Thailand’s requirement, said Mr Deja.

The central bank previously requested commercial banks run their own stress tests under a Covid-19 scenario in preparation for a sufficient capital-adequacy ratio (CAR) amid higher uncertainties likely to prevail until 2023.

In June, BBL’s CAR was 16.6%, of which 14% was tier-one capital.

Commercial banks are scheduled to submit their capital planning this month.

“We have succeeded with the AT1 bond issuance in the offshore market at a reasonable price, despite the pandemic,” said Mr Deja.

“Given the existing strong capital base, the bank doesn’t need to issue any additional perpetual bonds in the near future.”

BBL, the country’s second largest lender by total assets, offered AT1 bonds worth US$750 million (23.4 billion baht) last month.

The perpetual bond was offered in the overseas market with a coupon rate of 5% per year.

The AT1 issuance strengthened the bank’s tier-one capital base after its finances saw a dip in the second quarter following acquisition of Indonesia-based PT Bank Permata Tbk.

BBL completed its share acquisition of Permata at 98.71% of total paid-up capital of the Indonesian bank.

BBL received approval from Indonesia’s central bank, Otoritas Jasa Keuangan, to transfer its three branches in Indonesia to Permata.

Permata, a subsidiary of BBL, has around 300 networks across Indonesia.

After the BBL-Permata share-stake acquisition is completed, BBL’s international loan portion will represent 25% of the bank’s total outstanding debt, rising from 17%.

Mr Deja said the bank’s distressed debts are expected to increase marginally by year-end and such increase is manageable.

Higher NPLs mainly stem from the impact of the Covid-19 crisis.

The bank is ready to provide assistance to customers, especially retail and small and medium-sized enterprises, on a case-by-case basis after the central bank’s debt relief measures expire later this month.

BBL will retain its existing strategy for NPL management by itself rather than selling bad debts.