Bangkok--10 Jun--Fitch Ratings Fitch Ratings has today placed BankThai's (BT) Support rating of '4' on Rating Watch Evolving (RWE), pending the completion of a planned further capital raising and possible dilution of the Financial Institutions Development Fund's (FIDF) 42% stake in the next few months. Fitch assigns only a Support rating to BT. BT's financial position has been severely affected over the past year by its very large exposure to CDOs, which resulted in a large loss of THB7 billion in 2007, exceeding its prior year's equity base. Although the bank raised THB3bn in March 2007, resulting in the entry of TPG Newbridge as the largest private shareholder and a further THB6bn of capital infusion in January 2008, further CDO losses of THB2bn in Q108 have again weakened its financial position. At end-March 2008, BT's remaining CDO portfolio totalled THB8.2bn (down from more than THB14bn in mid-2007). The reported fair value of the portfolio at end-March 2008 is THB1.96bn, or 23% of cost, so further losses on the portfolio should be limited, although this is still unclear. Asset quality in the bank's domestic loan book has also significantly worsened over the past year, with NPLs rising to THB15.7bn or 16% of total loans at end-March 2008 (15% at end-2007, 8% at end-2006). Loan loss reserves of THB11.6bn or 75% coverage appear to be in line with its local peers, but given the NPL trend, provisioning risks remain. Following the CDO losses in Q108, capital ratios could have fallen below minimum regulatory requirements again. The planned sale of a portion of bad loans at the bank's subsidiary, Sathorn Asset Management, should improve the bank's capital ratios by end-June 2008. The RWE action indicates that the Support Rating could weaken to '5' once the FIDF further dilutes its stake, or strengthen if there is a strong long-term commitment by a highly rated institutional shareholder. Nevertheless, Fitch views that a clearer, longer-term strategy to improve the bank's franchise, risk controls and management, as well as the support of a strong shareholder, will be needed to restore the bank's viability. Contacts: Vincent Milton, Bangkok, +662 655 4759; Darunee Peanmanakit, Bangkok +662 655 4752. Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215.