Tuesday, September 16, 2008

Thai banks expect little Lehman fallout

SOMRUEDI BANCHONGDUANG

Thai banks have said their potential losses from the bankruptcy of the US investment bank Lehman Brothers are minimal.

Local banks have approximately 4.3 billion baht of direct exposure to Lehman Brothers, either in the form of loans or bond investments, according to the Bank of Thailand.

Bangkok Bank, Thailand's largest bank, is the biggest investor with 3.5 billion baht in total exposure primarily in bonds, according to executive vice-president Kulathida Sivayathorn.

''We are waiting to see the results of the court case,'' she said yesterday. ''We do not expect it to be a total loss.''

At Siam Commercial Bank, president Kannikar Chalitaporn said the bank would book provisions for losses on its investment in Lehman Brothers notes in the third quarter.

She declined to say how much exposure SCB, the country's third-largest bank, had in Lehman.

''But the investment is quite minor compared with the bank's total balance sheet,'' she said. ''It will not significantly impact our performance in the third quarter. And I don't see [the Lehman bankruptcy] affecting the banking sector.''

TMB president Boontuck Wangcharoen said the bank had cancelled its outstanding currency swaps with Lehman Brothers since Monday. TMB currently has no exposure to Lehman.

The Bank of Thailand says local banks have an additional 5.3 billion baht worth of swap and forex contracts with Lehman.

But total losses are projected at less than 100 million baht, as the principal of the contracts would be unaffected, according to Bandid Nijathaworn, a Central Bank deputy governor.

Prasarn Trairatvorakul, the president of Kasikornbank, said the bank had no exposure to Lehman Brothers.

He said Kasikornbank did have operations with other US banks, but that it had withdrawn all its investments in the US after the sub-prime mortgage crisis first exploded in mid-2007.

Dr Prasarn said domestic liquidity would be affected by the US financial sector crisis and the credit crunch, potentially leading to higher funding costs in the local market.

Continued selling of Thai securities by foreign investors would also drain liquidity from the local market, he said.

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