Bangkok--29 Oct--Fitch Ratings Fitch Ratings has today placed TMB Bank Public Company Limited’s (TMB) Long-term foreign currency Issuer Default Rating (IDR) of ‘BB+’, Short-term foreign currency IDR of ‘B’, Foreign currency subordinated debt rating of ‘BB’, Foreign currency hybrid Tier 1 rating of ‘B’, Individual ‘D’, Support ‘3’, Support Rating Floor of ‘BB’, national Long-term ‘A(tha)’, national Short-term ‘F1(tha)’, national subordinated debt ‘A-(tha)’ (A minus (tha)) rating on Rating Watch Evolving. The rating action follows TMB board’s announcement last week of its plan to raise THB35 billion of new equity by year-end — this could see the entry of a new stretagic shareholder, with ING Bank NV (‘AA’ / ‘F1+’) possibly being one of the investors. Thailand’s Ministry of Finance (MOF) is expected to support the capital raising. The recapitalisation should help stabilise the bank and its hybrid rating, which was downgraded in January 2007, and could be positive for the bank’s overall ratings over the longer term. The large capital increase and an expected return to profitability in 2008 should permit coupon payments to be renewed on the hybrid securities next year. Conversely, if there is a further large loss and prolonged delay in the recapitalisation, then further downgrades of the bank’s hybrid and other ratings are likely. The new strategic shareholder is likely to acquire an initial 30% stake in TMB. The capital raising is still subject to shareholder and regulatory approval. DBS of Singapore is not expected to subscribe to the new issue, which will result in its stake being diluted to about 6%, while the MOF will hold about 26%. The new capital of THB35bn should significantly strengthen TMB’s capital position, although this may be partially offset by additional provisioning. Future rating actions will be subject to further assessment of the impact on TMB’s banking franchise, earnings, overall business strategy and risk management, as well as the extent to which this addresses Fitch’s concerns on the bank’s profitability and asset quality. TMB reported a net loss of THB20.7bn in 9M07, due to a large loss of impairment of goodwill charge of THB12.6bn with respect of the business being transferred from DBS Thai Danu Bank Public Company Limited (DTDB) and the Industrial Finance Corporation of Thailand (IFCT), as well as loan provisions of THB13.5bn to comply with Bank of Thailand (BOT)’s stricter guidelines in preparation for IAS39. Asset quality remains weak with NPLs increasing to THB 64.4 bn or 13% at end-September 2007 from THB 56.1 bn or 10% at end-December 2006. Loan loss reserve coverage still appears low at about 50% of NPLs, implying a risk of further large provisioning. Unusually, the bank’s good loan book shrank by about 13% in 9M07, although the management indicated this is due to exiting lower yielding or higher risk segments. Accumulated net loss at end-September 2007 rose to about THB80bn from THB60bn at end-December 2006. Total capital ratio and Tier 1 capital ratio were 10.72% of risk-weighted assets and 6.97%, respectively, at end-September 2007. TMB is Thailand’s sixth largest bank with assets of THB652.8bn (about USD19bn) and 10% market share. Contacts: Vincent Milton, Bangkok, +662 655 4759; David Marshall, Hong Kong, +852 2263 9963. Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.