The Islamic Bank to cut the fat

The Islamic Bank to cut the fat

Seeks to reduce NPLs by 29% this year

The state-owned Islamic Bank of Thailand plans to aggressively cut its bad debts to single digits from 29% of outstanding loans.

The Islamic Bank of Thailand hopes to reduce its NPLs to single digits in 2014. Pattarachai Preechapanich

Under the plan, the bank will transfer 8 billion baht of non-performing loans (NPLs) to Sukhumvit Asset Management (SAM), with the rest under the bank’s own management, acting chairman Kunchit Singsuwan said.

The bank’s NPLs fell to 32 billion baht at the end of last year, after peaking at 43 billion baht.

Cutting NPLs is a crucial part of the bank’s business plan this year, as the state-backed bank has been struggling for years due to high bad credit.

He said the bank aimed to raise its capital adequacy ratio above the minimum required by the Bank of Thailand to 8.5% of risk-weighted assets from 1.87% currently.

The public bank is targeting an increase in net lending to 13 billion baht this year from 107 billion in 2013, while net deposits are expected to increase by 25 billion baht from 110 billion in 2013.

The bank previously planned to set net lending and deposit targets this year at the same level as last year, Kunchit said, but ongoing internal political disputes prompted the bank to lower the lending target.

He said the state-owned bank plans to move into the car loan service with a loan extension target of 11 billion baht this year, while the bill payment service will boost its revenue.

The bank plans to allocate 5 billion baht in sukuk, the country’s first Islamic bond, in the fourth quarter of this year to expand its business.

Premkamol Tinnakorn na Ayudhya, chairman of the bank, said the Islamic Bank posted a net profit of 2.7 billion baht in 2013 after a heavy net loss of 13 billion the previous year.

The bank plans to open branches in neighboring countries, including Malaysia, Indonesia and Myanmar, to help its customers who operate businesses in these countries.

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