BAM sees opportunities in troubled assets

State-run firm plans to list on SET

PARISTA YUTHAMANOP

State-owned Bangkok Commercial Asset Management (BAM) is confident about its future business prospects and the market for distressed assets, according to president Bunyong Visatemongkolchai.

BAM, first set up by the central bank's Financial Institutions Development Fund to oversee the liquidation of the defunct Bangkok Bank of Commerce, is planning to eventually list on the Stock Exchange of Thailand.

Mr Bunyong said BAM expected its assets to grow steadily in the future, even as asset quality in the banking system improves.

Even in normal economic times, non-performing loans would typically stand at 2% to 3% of total assets, he said.

''Banking system NPLs should stand at 2% to 3% of total loans, or say 200 to 300 billion baht, regardless of the economic trend. This should be enough to keep our business going,'' Mr Bunyong said.

BAM also has around 10,000 units of half-completed properties on its books that can be rehabilitated and sold for gains. Revenues for the agency are equally split between debt restructuring and property sales.

BAM's holdings of non-performing loans stood at 233 billion baht at the end of 2006, compared with 238 billion, or 4.15% of total loans, in the banking system.

Impaired assets held by BAM totalled 37.3 billion baht at the end of last year, compared with 175 billion in the banking system.

Last year, BAM purchased 109 billion baht in non-performing loans, including assets from the Asset Management Corp, NFS Asset Management, Thanachart Bank, BankThai, Siam Commercial Bank, Land and Houses Retail Bank and Kasikornbank.

Mr Bunyong said BAM posted a net profit of 1.78 billion baht for 2006, equal to an earnings per share of 3.27 baht.

Assets at the end of 2006 stood at 80 billion baht, with a return on assets ratio of 2.24% and a return on equity of 7.27%.

The company expects profits this year to remain on track at 1.6 billion baht, with the total value of its assets increasing to 90 billion, and an ROA of 1.78% and an ROE of 6.26%.

The central bank has stated that it wants BAM to be a major instrument in bringing down non-performing loans within the banking system.

But Mr Bunyong said progress in negotiating asset sales from local banks had been relatively slow, due to differences in appraising values for collateral assets.

Meanwhile, BAM plans to launch seven renovated property projects this year, and will also open a new office to market second-hand homes.

''The data show that the second-hand home market is equal to around 60,000 units, compared to 47,000 new units per year. But actually, I think the second-hand market could be larger,'' Mr Bunyong said.

To facilitate sales, BAM is offering 10-year loans at fixed interest rates of three percentage points under minimum lending rates.

Mr Bunyong said opening new showrooms and participating in property exhibitions would be BAM's main focus in stimulating sales this year. The company sold 1.3 billion baht worth of properties through exhibitions last year.

He added that BAM could possibly expand into the asset management sector if the law underpinning its establishment was amended.

Relative to commercial banks, BAM ranks 12th in terms of assets, third in terms of ROA and 13th in ROE.

By 2011, BAM expects total assets to drop slightly to 73.4 billion baht. Net profits should rise to 2.4 billion per year, with an ROA of 3.28% and an ROE of 6.79%.

Bangkok Post
Friday February 02, 2007