Bangkok--21 Jun--Moody's Moody's Investors Service has affirmed TMB Bank Public Company Limited's (TMB, D-/Baa2/P-2) B1/stable outlook for its Hybrid Tier 1 securities. All other ratings are unaffected. Earlier this week, TMB officially announced that the Bank of Thailand (BoT) has not approved TMB's July 2007 coupon payment on its US$200 million perpetual non-cumulative Tier-1 securities. This non-payment will not constitute a default by TMB under the terms and conditions of these hybrid securities. "Moody's has based the affirmation at B1/Stable on the expectation that TMB will be able to make distributions on the hybrid securities from July 2008 onwards," says Karolyn Seet, Moody's lead analyst for the bank. "However, the rating also reflects continuing uncertainty as to whether TMB's earnings for the second half of 2007 will be sufficient to allow the January 2008 distribution, given Thailand's current economic malaise. As such, the bank might have to incur larger provisions under IAS 39 at end-2007 than originally expected. Also, there is uncertainty as to how BoT will respond to future developments in TMB's earnings situation." "The B1 rating for the hybrid securities is five notches below the bank's deposit rating of Baa2. This large differential reflects the trigger for non-payment used in this instrument, which occurs when the bank reports a loss. There is a relatively high likelihood that fundamentally weak banks like TMB (bank financial strength rating of only D-), may report a lossin a given year, warranting a relatively low rating," explains Seet. "Given that TMB is likely to be able to make distributions from July 2008 onwards, the expected loss over the life of the security is relatively low, and consistent with a B1 rating," adds Seet. Moody's will continue to monitor any development that affects TMB's risk profile and financial fundamentals. Moody's will particularly monitor the capital raising plans of TMB. Failure to raise capital in the second half of 2007 under continuing losses may put downward pressure on its BFSR of D- and its deposit and debt ratings, including the hybrid securities. In January 2007 BoT allowed TMB to make its January interest payment despite a loss in fiscal 2006, in consideration of certain mitigating factors, such as the size of problem loan write-downs taken with the implementation of IAS39, its capital adequacy ratio and imminent capital-raising plans. Moody's understands that the BOT's decision to reverse its position for the July 2007 payment took the following three factors into consideration: (a) TMB's anticipated losses for the first half of 2007; (b) the bank's negative retained earnings; and (c) the uncertainty surrounding TMB's capital raising plans. The interest payment due in July 2007 amounts to approximately Bt 240 million (US$7.5 million). Headquartered in Bangkok, Thailand, TMB had total assets of about Bt 677 billion (US$ 21 billion) as at March 31, 2007. The Thai military's aggregate stake in TMB has declined significantly since the Asian financial crisis of 1997 and currently stands at about 3.45%. The Thai Ministry of Finance is the largest shareholder with 31.2%, while Singapore's DBS Bank holds 16.1%. The other ratings -- which are unchanged -- are: TMB Bank Public Company Limited -- Bank financial strength rating of "D-" TMB Bank Public Company Limited -- Foreign currency long-term/short-term deposit ratings of Baa2/P-2. Singapore Karolyn C. Seet Analyst Financial Institutions Group Moody's Singapore Pte Ltd. JOURNALISTS: (852) 2916-1150 SUBSCRIBERS: (65) 6398-8308 Singapore Beatrice Woo VP - Senior Credit Officer Financial Institutions Group Moody's Singapore Pte Ltd. JOURNALISTS: (852) 2916-1150 SUBSCRIBERS: (65) 6398-8308