SET-listed CIMB Thai Bank (CIMBT) will raise 5.51 billion baht in a rights offering as it moves to strengthen its capital adequacy ratio (CAR) and expand the business.
The recapitalisation was announced as CIMBT reported a net loss of 630 million baht in 2016, largely due to a sharp increase in impairment charges to be used as a buffer against an uptick in non-performing loans (NPLs).
The bank, 93.7% of which is owned by Malaysia-based CIMB Group, will offer 5.51 billion shares at a par value of 50 satang to existing shareholders at a ratio of two new shares for every nine shares held at a price of one baht each, president and chief executive Kittiphan Anutarasot said in a release.
The offering price is at a discount to the market price of CIMBT shares, which closed yesterday on the Stock Exchange of Thailand at 1.33 baht, down five satang, in trade worth 17.4 million baht.
"The bank's CAR and first-tier capital stood at 16.1% and 10.7% respectively as of Dec 31, 2016, well above the minimum requirements of authorities," Mr Kittiphan said.
"After the rights offering is completed, the bank's CAR will strengthen to 18.5%, which will improve the banks' capital base and balance sheets in order to serve business growth in 2017."
CIMBT aims for lending growth of 5-10% in all business segments this year, with a focus on lowering bad loans after experiencing an NPL surge last year amid a lacklustre economy.
The capital increase is subject to the approval of shareholders, who will meet on Feb 24. Registered capital will increase to 15.1 billion baht from 12.4 billion after the share sale.
CIMBT launched a 3.69-billion-baht rights offering in 2015.
"As the Thai economy is rebounding at a gradual pace and business circumstances remain challenging at the moment the bank set aside higher loan-loss provisions for the fourth quarter of 2016," said Tengku Dato' Sri Zafrul Aziz, CIMB Group Chief Executive of CIMB Group.
"CIMB Group is confident that the bank [CIMBT] will be able to turn to a profit in 2017 and CIMB Group will still provide full support to the bank's business operations, including the capital increase."
Thailand has high growth potential and is a strategic base for CIMBT to support cross-border trade in the Asean region, he said.
Bank of Thailand governor Veerathai Santiprabhob said the overall Thai financial sector remains strong, as seen by high loan-loss provisions, a firm capital base and solid profitability.
Recapitalisation is a matter for each bank, he said, declining to comment on any specific case.
"Some banks have policies to change their business models and may have different ways of setting aside reserves, but shareholders have shown their interest in subscribing to capital increases through shares," Mr Veerathai said.