Bangkok--19 Jul--TMB Bank TMB Bank Public Company Limited (TMB) today announced the preliminary financial results for its first half of fiscal year 2007 ending June 30, 2007. TMB’s total revenue for the first half of fiscal year 2007 was Bt22.50 billion, a 14.50% increase from Bt19.66 billion in the first half of 2006. Net interest income was Bt8.02 billion, compared to Bt7.82 billion in the same period of last year. The Bank’s core earnings improved significantly. Non-interest income rose 51.70% to Bt4.20 billion from Bt2.70 billion in the first half of 2006. The increase was mainly attributable to improved bond trading activities, increased consumer banking fees and higher foreign exchange income. Non-interest income to total income ratio was at 18.5%, compared to 14% in the first half of 2006. Net interest margin (NIM) improved from 2.12% in the first quarter of this year to 2.33% in the 2nd quarter. The improvement is a result of the Bank’s continuing strategy to improve margin by reducing low yield loans while at the same time reducing interest expenses by retiring high cost term deposits and aggressively growing low-cost savings deposits. The Bank made progress in non-performing assets (NPAs) management over the past six months as a total of approximately Bt4.66 billion of NPAs was sold. NPAs as at the end of June, 2007 were Bt26.33 billion, compared to Bt29.81 billion at the end of 2006. At the end of the first half of 2007, NPLs stood at Bt66.40 billion, an increase of Bt4.66 billion from year ended 2006. An increase in NPLs is due largely to the loans reclassification in the 2nd quarter of 2007. The Bank, in consultation with the Bank of Thailand (BoT), reclassified approximately Bt11 billion of performing loans to substandard category or lower at the end of the 2nd quarter. Some of these reclassified loans continue to service normal interest to the Bank. The loan reclassification is a combination of continuing more stringent internal qualitative loan review as well as a rise in NPLs due to the poor economic condition. At the same time, the Bank was able to restructure and sell approximately Bt6.3 billion in NPLs in the first half of 2007. As a consequence, the Bank has set aside additional provisioning of Bt8.20 billion in the first half of 2007. Despite the strong operating profit, TMB recorded a net loss of Bt5.91 billion in the reporting period. TMB’s capital adequacy ratio remains above 10%. Due to recent regulatory changes, namely the Bank of Thailand’s guideline on the preparation for IAS 39, coupled with the unfavourable operating results, TMB is in the process of re-assessing the fair value of its existing goodwill balance (Bt12.24 billion as of June 2007), which arose from the 2004 merger with The Industrial Finance Corporation of Thailand (IFCT) and DBS Thai Danu Bank. The Bank is concerned that a significant impairment may be possible and a third-party financial adviser has been retained by the Bank to conduct a goodwill impairment review. Any goodwill impairment arising from the review will result in a reduction of the carrying value of goodwill and an impairment loss. When the review is completed, a non-cash impairment loss could result in the first half 2007 audited financial statements being materially different from the preliminary financial statements. However, such non-cash impairment will not impact the Bank’s capital adequacy level given its non-cash nature and exclusion from capital adequacy calculation. As at June 30, 2007, TMB Bank’s total assets were Bt658.58 billion. Total loans were amounted to Bt505.17 billion. NPLs were Bt66.40 billion compared to Bt61.77 billion in December 2006. Commenting on the results, Mr. Somchainuk Engtrakul, Chairman of TMB Bank, said “Despite the significant provision taken in the first half of 2007, the Bank’s capital adequacy ratio remains at approximately 10% compared to the minimum requirement of 8.50% set by the Bank of Thailand. Our half year results reflect the challenges we’ve faced in trying to improve credit quality of the portfolio. At the same time, we have achieved a significant progress in implementing the strategy to reduce interest expense by restructuring deposit mix and increasing non-interest revenue. Since late 2006, significant amount of low-interest saving deposit has been brought into the Bank to replace the high-cost term deposit. Low- cost saving deposit as a portion of total deposit has improved from 25.8% at the end of 2006 to 38.2% in June 2007. Our improving net interest margin from 1.99% in the 4th quarter of 2006 to 2.33% in the 2nd quarter of 2007 is a reflection of the effort to change the bank’s loan portfolio composition and pricing. We believe we have positioned ourselves well in strengthening our core earnings growth and future profitability. At the same time, we continue to be focused in our efforts in increasing our capital adequacy level and are expecting a positive outcome shortly." For more information please contact: Tel: +66 2 242 3255 +66 2 242 3260 +66 85 813 302 Fax: +66 2 242 3254 [email protected]