BT and SCIB say no Lehman exposure
BT and SCIB say no Lehman exposure
SOMRUEDI BANCHONGDUANG
Two local banks yesterday issued clarifications about their foreign investment portfolios in response to investor concerns that they could be forced to book higher provisions to cover potential losses due to gyrations in the international financial markets.
BankThai and Siam City Bank both insisted they had no exposure to securities of failed investment bank Lehman Brothers.
BankThai, in a statement to the Stock Exchange of Thailand, said its outstanding foreign investment portfolio would stand at $410 million as of the end of this month. This compares with $690 million at the end of the second quarter.
Sutee Losoponkul, an executive of BankThai’s treasury and trading division, said the bank sold down its entire portfolio of collateralised debt obligations on July 29, gaining 970 million baht to be booked in the third quarter.
Remaining investments remain current, with $190 million in principal repayments due to be paid this month as a result of early redemptions due to declining overseas interest rates.
“We will earn $140 million from early redemption in foreign bonds over the next several days. We will receive $190 million to be paid by the end of the month,” Mr Sutee said.
“Most of the debentures are issued by European banks. BankThai expects other foreign bonds would be called for early redemption as a result of falling interest rates trends.”
BankThai said in its statement to the SET that its remaining foreign portfolio comprised of $190 million sovereign bonds or debt issued by state entities and guaranteed by foreign governments.
“Such debts are not classified as risk assets and carry a risk weight of zero,” the bank said, and comprised $50 million in Korean government bonds and debt instruments issued by state agencies and guaranteed by the German and Canadian governments.
Another $220 million in overseas investments included debentures issued by six international banks: Rabobank, HSBC France, JPMorgan Chase, Royal Bank of Canada, KBC Bank and Dexia Banque Internationale, Luxembourg. The securities have ratings of AA- to AAA.
BankThai executives said they would maintain a neutral investment policy pending the entry of Malaysia’s CIMB as a major shareholder.
At Siam City Bank, president Chaiwat Utaiwan said the bank’s outstanding foreign investments totalled 13.5 billion baht, or just 3.3% of its total assets.
“The entire of the investment are in sovereign bonds and state entities guaranteed by foreign governments with investment-grade ratings,” he said.
Siam City Bank had hedged its risk against its foreign bond portfolio, Mr Chaiwat said, and had no exposure to Lehman Brothers.
Bank shares across the world took a beating on investor fears that exposure to Lehman Brothers securities could force huge writedowns after the Wall Street giant declared bankruptcy last week.
According to the Bank of Thailand, local banks have approximately 4.1 billion baht in exposure to Lehman Brothers securities, with the large majority held by market leader Bangkok Bank.
BT shares closed yesterday on the SET at 1.30 baht, down one satang, in trade worth 483,000 baht. SCIB shares closed at 11.60 baht, down 60 satang, in trade worth 10.3 million baht.
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Tags: Bankthai, Canadian Governments, Collateralised Debt Obligations, European Banks, Government Bonds, International Banks, International Financial Markets, Investment Portfolios, Investor Concerns, Lehman Brothers, Overseas Interest, Overseas Investments, Principal Repayments, Risk Weight, Scib, Siam City Bank, Sovereign Bonds, State Entities, Stock Exchange of Thailand, Sutee