Risk Factors

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					         Bangkok First Investment & Trust Public Company Limited

Risk Factors
The following risk factors might impact the business of the Company.

1. Credit Risk
     1.1 Lending Risk

     This arises from loans that default in payment of interest or principal, effectively
     becoming a non-performing loan resulting from losses incurred by the debtor due to
     several factors including an economic slump, the fall of purchasing power of
     consumers, or excess production capacity.

     Hence, the Company has to adopt a conservative lending policy and concentrate on
     good quality assets covering all its lending activities. Lending is focused on medium
     corporations, which normally have lesser financial risks than the small business
     operators and individual borrowers. The Company utilizes its credit analysts who
     scrutinize the customers’ financial status and make proposals to the credit committee
     for final credit approval. The line of authority and credit approval process is clearly
     defined. In order to reduce the concentration of risk in any particular industry, the
     Company lends to industries that have high growth potential only. This credit policy is
     to reduce the lending limit of each borrower, to aim on loans with working capital and
     short maturity and also to be in line with the rules and regulations as stipulated by the
     Bank of Thailand.

     Notwithstanding, the Company has been adopting a proactive policy in risk
     management through a credit committee, whereby all doubtful accounts are closely
     monitored. The Company’s debt restructuring committee is ready to resolve and
     speed up the recovery of non-performing loans and to provide assistance for all
     doubtful accounts. If the Company needs to set aside provisions it will carry out this
     strictly in accordance with the Bank of Thailand requirements. At present, the
     Company has even surpassed the requirement of setting the provision, which
     indicates its proactive and conservative role in taking on such action.

     1.2 Risk arising from deteriorating quality of loans.

     Non-performing loans can be classified into substandard, doubtful and doubtful of loss
     that can be affected to the company’s earnings and capital funds of. As 31 December
     2006, the company’s non-performing loan amounted to 127 million baht, accounting
     for 4.17 percent of loans, receivables and accrued interest receivables. It’s decreased
     from the end of year 2005 which amounted to 141 million baht.

     The company concentrates on quality of loans by set up a conservative lending policy
     which concentrates on quality of loans and assets. Moreover, as a safeguard against
     losses from current non-performing loans and expectant non-performing loans, the
     company has set the reserve for non-performing loans amounted to 212.80 million
     baht that higher than the reserves required by the Bank of Thailand about 51.36
     million baht, accounting for 131.81 percent of criterion by Bank of Thailand.

2. Market Risk
     2.1 Interest Rate Volatility Risk

     Interest rate volatility can normally affect the interest spread. The larger the interest
     spread the higher the net earnings for the Company. If the interest spread is low due
     to excess liquidity and when lending must be carefully monitored, the Company will
     have lower bargaining power, and hence can also have negative impacts on the

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               Bangkok First Investment & Trust Public Company Limited

   earnings. Nevertheless, the Company is closely monitoring the interest rate
   movement in order to effectively set the most suitable strategy of fixing both the
   lending and deposit rates.

   Interest rate volatility also affects investments in debt instruments such as bonds and
   debentures. If the market interest rates move higher, the expected returns on the
   investments in bonds would also increase. Hence, the market price of the bonds
   would fall. Under such situation, the Company might choose to reduce its risks
   exposure via adjustment to the duration of the bonds portfolio and selecting good
   quality bonds that have liquidity for trading.

   As at the end of 2006, the Company’s investments for sales in both short-term and
   long-term bonds at market value excluding accrued interest were 1,661.72 million
   baht. If the market interest rates rise by 1.00 percent it would affect the market
   value of the bonds for sale portfolio by 1 percent of the investment value in opposite
   direction. However, if the Company holds the bonds for sale until maturity the cost of
   the investment in the bonds will not be affected by the interest rate volatility.

   In addition, at the end of 2006, the Company also has investments in bonds that are
   intended to hold until redemption worth 754.13 million baht. In this case, interest
   rate volatility does not have any effect on the Company’s accounting. The yield of the
   investment will be equivalent to the rate of return on the investment.

   2.2 Price Risk

   Price risk is a risk from change in bonds prices and securities prices which directly
   affect net income and capital funds of the Financial Institution.

   The company has invested in listed securities that have risk from volatility in stock
   exchange market price. As 31 December 2006, domestic marketable equity securities
   amounted to 43.46 million baht, accounting for 1.66 percent of total investments.
   However, the company does not have a large number of investments in listed
   securities. Most of investment will focus on listed securities with well-fundamental and
   highly dividend payment. Moreover, the investment committee also has a policy to
   stop loss whenever a listed securities share price falls below a designated level.

   The company has Domestic non-marketable equity securities after allowance for
   impairment loss amounted to 43.96 million baht. The company has no policy to
   increase investment in non-listed securities but concentrated on quality of securities
   and sells the securities at designated level.

   In debt instruments, the volatility of price caused from change in interest rate which
   mentioned on (2.1) Interest rate volatility risk.

3. Liquidity Risk
   A liquidity risk will arise when the Company cannot make payment on its debt when it
   is due. The Company utilizes a risk control system that complies with the Bank of
   Thailand requirement that states that liquid assets must be maintained at not less
   than 6 percent of the Company’s total borrowings from the public, both domestic and
   overseas. These liquid assets can be cash deposits with the Bank of Thailand,
   government and state enterprise bond holdings and cash deposits at locally-registered
   financial institutions. The excessive liquidity could expand to loan and investment
   which raised Company’s earning.

   When there is a need for cash, for example in case of debt repayment on the
   promissory notes at expiration or expansion of new credits, the responsible
   department will know in advance and will maintain sufficient liquidity for such
   matters. By reviewing the daily financial status report, the Company is able to

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         Bangkok First Investment & Trust Public Company Limited

     effectively manage its liquidity. However, in an emergency case or there is no
     advance notice, the Company was established an emergency backup account with
     financial institution to provide liquidity.

     From the balance sheet, as 31 December 2006 the Company’s financial assets and
     financial liabilities classify by maturity are followings:

                                                        Not more than         Over
                                                          one year          one year

      Financial assets

      - Cash and deposits at financial institutions             47.8              -

      - Loans to Financial institutions – net                   49.8              -

      - Securities purchased under resale agreements          506.0               -

      - Net investments                                     1,046.1          2,890.8

      - Financial business loans and receivables            1,703.3          1,217.7

      Total Financial assets                                3,353.3          4,108.5

      Financial liabilities

      - Borrowings and deposits                             4,966.4            140.8

      - Securities business payables                             0.1              -

      Total Financial liabilities                           4,966.5            140.8

     * Excluded Non-performing loans

     The Company had risk from Maturity Mismatch. The Majors Source of Funds came
     from short term borrowings and deposits which were usual structure of deposit.
     However, a majority of them are rolled over automatically upon maturity.
     Notwithstanding, the majors investment funds both short term and long term were
     domestic securities and loan from financial institution that could be sufficiency for
     liquidity problem. Moreover, the Company was established an emergency liquidity
     plan for liquidity crisis which included emergency liquidity manual.

     As 31 December 2006, the Company had liquidity assets accounted for 21.54 percent
     of Total borrowings and deposits which exceeded the requirement of the Bank of

4. Operation Risk
     4.1 Management Risk

     The majority of management executives has been employed with the Company for a
     long time and possesses high experience and knowledge about the nature of the
     business. The fact that the management has steered the Company through the
     economic crisis of the past few years has been evident. In accordance with the
     Company policy of decentralization the management has continued to provide and
     transfer knowledge and experience to the mid-level management officers in
     attempting to reduce risks.

     4.2 Information Technology System Risk

      A modern IT system-linked database with high accuracy and timely service is very
     crucial to the decision-making process for the day-to-day business operation amid the
     intense competition in the industry. Such system is categorized as follows:

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               Bangkok First Investment & Trust Public Company Limited

  4.2.1    Workflow and Database: These have been developed internally by the
           Company’s staffs that have been responsible for the efficiency and
           effectiveness of the systems to provide support for all the needs of the end-
           users. Concurrently, the IT system is being upgraded on a continual basis and
           in line with local industry standards to cope with the increasing demand and
           competitive edge of the securities business.

   4.2.2   System Hardware: The Company has set up a contingency back-up plan for
           all its computer hardware including the peripheral equipment. A back-up
           system has been developed to safeguard the Company’s databases. A set of
           stand-by computer system is available in the event that the central computer
           system fails so that the daily business operation would not be affected.

   4.2.3   System Network: A modern local area network (LAN) system is currently in
           use to provide interactive on-line access for all users within the Company. A
           network firewall is also in place to prevent any illegal entry. Moreover, the
           Company's system network has the capability to link up with other outside
           sources such as the Stock Exchange of Thailand and the Bank of Thailand. A
           contingency plan and a back-up system network have been prepared and
           would be ready to provide support and ensure that the daily business
           operation can run smoothly should the existing LAN network faces a link-up
           difficulty with the external sources.

   4.2.4   Trained Staffs: The Company has well-trained and skilled IT staffs who
           continue to receive support from the management in terms of training and
           workshop attendance in order to enhance each staff member's efficiency and
           knowledge about this fast-changing global technology.

   4.3 Risk arising from key personnel

   The majority of staffs has been employed with the Company for a long time and has
   accumulated extensive professional experience. However, given the highly
   competitive nature of the Company's business amid the fast-changing investment
   conditions over the past few years, some staffs might find it difficult to adjust to the
   changes. Hence, the Company has introduced a policy to provide training and
   orientation for further development of its human resources. New staffs with special
   skills and knowledge are also being recruited to help lift the efficiency of the business

5. Strategic Risk
   5.1 Capital Adequacy Risk

   The Company’s capital fund is primarily used for extending new credits and for making
   further investments through the most proper and effective allocation of funds. The
   Company maintains a capital-to-risk assets ratio higher than that required by the Bank
   of Thailand. The capital adequacy risk factor is closely monitored on a daily basis by
   the responsible credit control section of the loan and placement department which
   checks and re-examines the outstanding balance to ensure that they are in line with
   the approved credit.

   The Company’s investments in equity are monitored so that the value of the initial
   investment cost does not exceed 60 percent of the capital fund at any one time,
   excluding that equity that has been derived from debt restructuring. To control the
   single credit risk factor, the Company also factors in the investment in equity and
   debts instrument with credit extension. The responsible credit officer must make sure
   that the total exposure to each customer does not exceed that required by the Bank of

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        Bangkok First Investment & Trust Public Company Limited

     As at the end of 2006, the Company’s capital-to-risk assets ratio was at a high level
     of 28.97 percent, in comparison with the Bank of Thailand’s requirement of 8.0
     percent. Hence, there is more than sufficient capital for new lending and further
     investments, including provisions for assets deterioration in the foreseeable future.
     Moreover, the present Company’s capital-to-risk assets ratio calculated follow to
     BASEL II standards will be sufficient also.

     5.2 Regulation Risk

     The risk arises from improvements or changes in regulations, law or requirements of
     the authorities concerned which might affect the Company’s business operations.

     At the end of 2006, the Bank of Thailand was changed the announcement about
     regulation, loan classifies, reserves and appraisal which was related to an
     International Accounting Standard (IAS) No.39: Financial Instruments: Recognition
     and Measurement. The Bank of Thailand was expected to regulate IAS no.39 in year
     2008 which announced this regulation for Financial Institutions to prepare. If the
     company adopts IAS no.39, the company will increase reserves to 100 percent of
     non-performing loans subtract present value of expecting cash flow from sale
     collateral assets. This change is more regulate in non-performing loans. However, it’s
     not significant effect from this change because the company has non-performing
     loans in a small amount and the company was set the reserves higher than the
     criterion by Bank of Thailand.

     Moreover, changes in Thai accounting standard No.44 regarding investment in
     subsidiaries from recognize subsidiary’s business operation by portion of equity
     shares (equity method) to recognize whenever subsidiary’s dividend payment (cost
     method) which affected the company’s recognition in business operation of
     subsidiaries. This change regulated since 2007. However, the consolidate balance was
     not affected from this change.

     5.3 Risk from investment in subsidiary

     The risk from investment in subsidiaries that the company’s earnings or capital funds
     are adversely affected by recognition of losses from its investment in the subsidiary,
     as a result of theirs negative performance.

     As fourth quarter 2006, BSEC (the subsidiary) was listed in Stock Exchange of
     Thailand by offering newly ordinary shares to the existing shareholder of BFIT and

     As a result of increase equity capital of BSEC, its affect the company’s equity which
     was decreased from 100 percent to 50 percent of total stock offered by BSEC. So, the
     company’s recognize gain and loss in subsidiary decreased to 50 percent.

     The mainly income of BSEC come from brokerage fees that related to economic
     condition, money market and capital market condition. Moreover, competition risks in
     securities business which finding quality marketing officer, large customer base. It’s
     importance subsidiary’s risk. In addition, they have the risk of default in payment or
     securities transferring by customers.

     For the details of risk in BSEC could find in the Annual Report (Form 56-2) of BSEC.

26    Annual Report 2006 ____________________________________________

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