The outcome of Krungthai Bank's (KTB) probe on loan extensions to Energy Earth Plc (EARTH) has found wrongdoers at both operating and management levels, says bank chairman Ekniti Nitithanprapas.
The examination conducted by the bank's investigation committee will be presented to KTB's board of directors later, he said without revealing any names.
KTB is Energy Earth's largest creditor with total debt plus interest of 12 billion baht. The bank earlier said reserves set aside to cover bad loans rocketed up by 79.3% year-on-year and 86% quarter-on-quarter to 13.9 billion baht during the April-to-June quarter last year after coal miner Energy Earth defaulted.
KTB, the country's largest state-controlled bank, has provided credit facilities to Energy Earth since the reign of former president Apisak Tantiworawong, who is now Finance Minister, and the loan extension continued into era of ex-president Vorapak Tanyawong and the incumbent president Payong Srivanich.
Energy Earth failed to redeem two lots of bills of exchange (B/Es) worth 90 million baht that were due in June 2017.
The company's financial problems snowballed when a raft of B/Es defaulted, triggering cross-default debentures worth 5.5 billion baht, compounded by failed efforts to seek fresh funding from financial institutions.
Earth is in rehabilitation plan after two-thirds of Earth's creditors voted in favour of approving the company's business rehabilitation plan in August, with EY Corporate Advisory Services Ltd as the company's rehabilitation planner.
Mr Payong said the investigation has found some breaches of discipline, but it still needs to wait for the bank's board consideration again.
The bank had set full provisions for loan losses from Energy Earth's case last year. KTB hopes that the company will be able to resume operations and service debts as stated in the rehabilitation plan.
The bank expects to set aside impairment charges for the final quarter similar to the third quarter at 6 billion baht due to stable non-performing loans (NPLs).
Mr Payong said the bank aims to keep a lid on NPLs at 100 billion baht by the end of this year from around 110 billion as of September, and raise the coverage ratio to be on par with industry peers at 140% on average.
KTB's coverage ratio stood at 122.59% at the end of September but the ratio is unlikely to reach 130% by the end of the year, he said.
Despite a mere 2.2% loan growth for the first nine months, KTB is maintaining its lending growth target at 6-7% this year.
Regarding the Bank of Thailand's proposed measures to curb mortgage lending, he said that he disagreed with the new requirements as some mortgage schemes were made under cooperations with property developers.
He said the central bank should not apply a one-size-fits-all regulation.
Banyong Pongpanich, chief executive of Kiatnakin-Phatra Financial Group, threw support behind the central bank's move to use a higher loan-to-value ration to fend off speculation in the property sector.
Macroprudential measures are considered normal practices whenever a central bank detects financial irregularities, said Mr Banyong.
