(The following statement was released by the rating agency)
Jan 14 - Standard & Poor's Ratings Services said today that the fourth-quarter results of TMB Bank Public Co. Ltd. have not affected our rating or outlook on the bank (BB+/Positive/B; axBBB+/axA-2). In our view, a sharp decline in reported nonperforming loans (NPLs) may not reflect a sustained improvement in asset quality.
We attribute the steep drop in NPLs in the last quarter of 2012 to a one-time sale of such loans. TMB sold off Thai baht (THB) 5.7 billion in NPLs, reducing the NPL ratio to 4.1% as of Dec. 31, 2012, from 5.44% as of Sept. 30, 2012. Moreover, the bank made a huge one-time provision of THB5,286 million, leading to financial losses for the quarter. On a full-year basis, the bank made a marginal profit.
We expect the bank's capitalization levels to remain at moderate levels despite lower profits last year. TMB's pre-provision performance has strengthened because of increased margins. The bank's reported margins rose to 2.73% for fiscal 2012, compared with 2.41% in the previous year. TMB's cost-to-income ratio also continued to improve.
TMB intends to accelerate loan growth this year, which we believe could increase the risk of NPLs. The bank aims to focus on small and midsize enterprises, which we view as a high-risk segment. Sustained improvement in TMB's risk management practices and execution of its business strategy would underpin the rating.