The Islamic Bank of Thailand plans to float 55 billion baht worth of Islamic bonds

The Islamic Bank of Thailand plans to float 55 billion baht worth of Islamic bonds in the local and overseas markets in 2010, says bank president Dheerasak Suwannayos.

He said the bank hoped to raise 5 billion baht from a local Islamic bond issue in the second quarter, the first issued in the Thai market.

Another 50 billion baht in funds would be raised as a sovereign bond issue in the international market by the third quarter.

“We hope to raise funds from the petrodollar market, using interest in basic infrastructure investments and funding from Islamic infrastructure funds,” Mr Dheerasak said.

The Islamic bonds would be issued in strict compliance with Islamic law, with investor returns projected at 3% to 4% per year. Bonds would be offered to individual and institutional investors.

The Finance Ministry and the Revenue Department are in the process of drafting regulations to remove tax obstacles related to the issue of Islamic bonds, including tax liability from the transfer of assets to a special purpose vehicle typically used in Islamic finance structures.

The Islamic Bank posted a net profit of 334 million baht in 2009, a sharp increase from profits of 2.08 million the year before.

Outstanding deposits stood at 41 billion baht at the end of last year, more than double the year before. Outstanding credit showed similar growth at 38 billion baht at the end of December, up from 16.7 billion the year before.

Net assets for the bank at the end of 2009 were 45.2 billion baht, compared with 23.8 billion the year before.

Mr Dheerasak said the bank, also known as I Bank, expected to reach net assets of 100 billion baht by the end of the year, with outstanding deposits of 78.7 billion and credit of 88.7 billion. Profits are projected at 668 million baht, double last year’s figures.

He said the bank would require additional capital to reach the growth target. The Finance Ministry has already approved a plan to raise paid-up capital for the bank to 9.87 billion baht from 3.48 billion now.

“But at the end of the day, I Bank is not solely oriented on generating profits, but also helping society as well,” Mr Dheerasak added.

For instance, the bank diverts a portion of its late-payment fees to a special fund to assist the poor. I Bank is also helping credit card borrowers refinance loans as part of a broader government programme to address the problems of low-income debt.

Source : Bangkok post