Review report of Independent Auditor To the Shareholders of Thanachart Bank Public Company Limited

Transcription

1 Thanachart Bank Public Company Limited and its subsidiaries Report and interim

2 Review report of Independent Auditor To the Shareholders of Thanachart Bank Public Company Limited I have reviewed the accompanying consolidated balance sheet of Thanachart Bank Public Company Limited and its subsidiaries as at, the related consolidated statements of income for the three-month and nine-month periods ended and, the related consolidated statements of changes in shareholders equity and cash flows for the nine-month periods then ended, and the separate of Thanachart Bank Public Company Limited for the same periods. These are the responsibility of the management of the Bank as to their correctness and the completeness of the presentation. My responsibility is to issue a report on these financial statements based on my reviews. I conducted my reviews in accordance with auditing standard applicable to review engagements. This standard requires that I plan and perform the review to obtain moderate assurance as to whether the are free of material misstatement. A review is limited primarily to inquiries of the Bank personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. I have not performed an audit and, accordingly, I do not express an audit opinion. Based on my reviews, nothing has come to my attention that causes me to believe that the accompanying are not presented fairly, in all material respects, in accordance with generally accepted accounting principles.

3 I have previously audited the consolidated of Thanachart Bank Public Company Limited and its subsidiaries and the separate of Thanachart Bank Public Company Limited for the year ended December in accordance with generally accepted auditing standards and expressed an unqualified opinion on those under my report dated 24 February. The consolidated and the separate balance sheets as at December, as presented herein for comparative purposes, formed an integral part of the which I audited and reported on. Ratana Jala Certified Public Accountant (Thailand) No Ernst & Young Office Limited Bangkok: 10 November 2

4 Thanachart Bank Public Company Limited and its subsidiaries Balance sheets As at and December (Unit: Thousand Baht) Consolidated Separate Note December December (Unaudited but (Audited) (Unaudited but (Audited) reviewed) reviewed) Assets Cash 11,439,2 3,720,233 2,771,422 3,719,729 Interbank and money market items Domestic Interest bearing 70,449,596 53,134,784,869,925 52,548,013 Non-interest bearing 7,265,916 3,707,561 4,717,043 3,577,499 Foreign Interest bearing 265,9 7,571, ,889 7,571,685 Non-interest bearing 980,001 3, ,029 3,089 Total interbank and money market items - net 78,960,822 64,745,119 36,980,886 64,028,286 Investments Current investments - net 4 41,601,261 23,021,886 10,083,929 18,988,982 Long-term investments - net 4 92,265,756 54,9,5,603,923 41,172,2 Investments in subsidiary companies ,637,748 4,481,643 Investments in associated companies 6 1,978,991 1,260, Net investments 135,846,008 78,602, ,325,837 64,642,856 Loans and accrued interest receivables 7 Loans 581,0, ,823,371 6,427, ,576,807 Accrued interest receivables 923, , , ,232 Total loans and accrued interest receivables 582,233, ,100,404 6,695, ,859,039 Less: Allowance for doubtful accounts 8 (26,326,266) (8,363,388) (8,170,664) (7,717,513) Revaluation allowance for debt restructuring 9 (463,733) (33,150) (40,659) (33,150) Net loans and accrued interest receivables 555,443, ,703, ,483, ,108,376 Property foreclosed - net 11 6,820, , , ,221 Customers' liability under acceptances 64, Land, premises and equipment - net 9,089,112 2,211,400 1,762,668 1,950,186 Intangible assets - net 4,820, , ,753 4,337 Receivables from clearing house 924, , Receivables from purchase and sale securities and derivatives 6,039,057 1,001,691 1,905,280 9,889 Financial derivatives assets 3,505, , , ,688 Goodwill 18,543,352 10, Other assets - net 4,505,262 3,201,405 1,767,297 1,835,620 Total assets 836,001, ,969,7 459,907, ,878,188 The accompanying notes are an integral part of the.

5 Thanachart Bank Public Company Limited and its subsidiaries Balance sheets (continued) As at and December (Unit: Thousand Baht) Consolidated Separate Note December December (Unaudited but (Audited) (Unaudited but (Audited) reviewed) reviewed) Liabilities and shareholders' equity Deposits Deposits in Baht 497,039, ,206, ,664, ,637,369 Deposits in foreign currencies 566,047 89, ,459 89,954 Total deposits 497,605, ,295, ,847, ,727,323 Interbank and money market items Domestic Interest bearing 38,578,898 15,5,183 25,976,971 16,484,109 Non-interest bearing 1,503,088 4, , ,024 Foreign Interest bearing 5,912,992 5,193,821 5,912,992 5,193,821 Non-interest bearing 98,005 8,822 24,851 8,822 Total interbank and money market items 46,092,983 20,938,790 32,443,941 22,164,776 Liability payable on demand 3,512,979 2,111,812 2,450,016 2,111,812 Borrowings 12 Short-term borrowings 1,882,742 75,200, ,845,719 75,936,199 Long-term borrowings 38,804,921 15,000,000 25,449,192 15,000,000 Total borrowings 169,687,663 90,200,199 1,294,911 90,936,199 Banks' liability under acceptances 64, Accrued interest payable 2,149,791 1,019,602 1,217,209 1,029,409 Corporate income tax payable 1,241,513 1,257, ,481 1,138,356 Payable to clearing house 615,582 95, Payable from purchase and sale securities and derivatives 5,686,710 1,345,843 2,127,434 9,888 Financial derivatives liabilities 1,232,359 24, ,013 24,228 Accrued expenses 3,364,209 1,651,006 1,182, ,519 Unearned premium reserve 1,662,543 1,354, Life premium reserve 25,325,692 15,286, Other liabilities 7,107,110 3,516,089 2,507,400 2,281,440 Total liabilities 765,348, ,097, ,135, ,522,950 The accompanying notes are an integral part of the.

6 Thanachart Bank Public Company Limited and its subsidiaries Balance sheets (continued) As at and December (Unit: Thousand Baht) Consolidated Separate Note December December (Unaudited but (Audited) (Unaudited but (Audited) reviewed) reviewed) Shareholders equity Share capital 13 Registered 5,934,619,272 ordinary shares of Baht 10 each 59,346,193 59,346,193 59,346,193 59,346,193 Issued and paid-up share capital 5,513,664,903 ordinary shares of Baht 10 each ( December : 1,934,619,272 ordinary shares of Baht 10 each) 55,136,649 19,346,193 55,136,649 19,346,193 Share premium 2,100,694 2,100,694 2,100,694 2,100,694 Revaluation surplus on investments 14 1,627, , , ,976 Revaluation deficit on investments 14 (357,156) (381,255) (123,853) (192,283) Surplus from business combination under common control (123,379) (123,379) - - Retained earnings Appropriated - statutory reserve 370, , , ,019 Unappropriated 11,371,224 5,734,597 7,908,285 4,324,639 Equity attributable to the Bank s shareholders 70,125,561 27,811,392 65,772,202 26,355,238 Minority interest - equity attributable to minority shareholders of subsidiaries 527,558 60, Total shareholders equity 70,653,119 27,872,083 65,772,202 26,355,238 Total liabilities and shareholders equity 836,001, ,969,7 459,907, ,878, Off-balance sheet items - commitments 21.1 Aval to bills 1,084, , , ,251 Liability under unmatured import bills 1,4,511 87, ,811 87,557 Letter of credits 3,011,292 1,009,878 1,375,055 1,009,878 Other commitments 202,5,749 91,880,760 79,927,565 91,215,660 The accompanying notes are an integral part of the.

7 Thanachart Bank Public Company Limited and its subsidiaries Income statements For the three-month periods ended and (Unit: Thousand Baht except earnings per share expressed in Baht) Consolidated Separate Note Interest and dividend income Loans 4,418, ,642 1,057, ,245 Interbank and money market items 245, ,224 66, ,983 Hire purchase and financial lease 3,786,935 3,790,500 3,738,193 3,632,606 Investments 1,368, , , ,806 Total interest and dividend income 9,819,4 5,369,011 5,297,461 5,180,640 Interest expenses Deposits 1,560, , , ,895 Interbank and money market items 178,599 37,275 98,7 41,878 Short-term borrowings 357, , , ,571 Long-term borrowings 516, , ,0 233,903 Total interest expenses 2,613,403 1,480,557 1,560,050 1,491,247 Net interest and dividend income 7,206,028 3,888,454 3,737,411 3,689,393 Bad debts and doubtful accounts (336,929) (246,734) (36,247) (266,126) Loss on debt restructuring (67,435) (14,984) (113,428) (6,202) Net interest and dividend income after bad debts and doubtful accounts and loss on debt restructuring 6,801,664 3,626,736 3,587,736 3,417,065 Non-interest income Brokerage fees 416, , Gain (loss) on investments 187,635 (20,278) 11,946 (4,7) Share of income from investments accounted for under equity method 43,142, Fees and service income Acceptances, aval and guarantees 65,681 10,332 10,021 10,332 Discounted income on insurance premium 64,288 91, , ,626 Others 901, , , ,076 Gain (loss) on exchanges and financial derivatives contracts 85,788 40,807 (239) 40,807 Gain on disposal of property foreclosed and other assets 28,767 13,797 1,898 12,871 Insurance premium/life insurance premium income 3,078,561 5,819, Income on supporting services 18,744 19,172 74,242 58,045 Other income 298, , , ,917 Total non-interest income 5,189,829 6,919, , ,943 The accompanying notes are an integral part of the.

8 Thanachart Bank Public Company Limited and its subsidiaries Income statements (continued) For the three-month periods ended and (Unit: Thousand Baht except earnings per share expressed in Baht) Consolidated Separate Note Non-interest expenses Personnel expenses 2,429,638 1,107, , ,421 Premises and equipment expenses 972, , , ,545 Taxes and duties 183,977 40,860 43,243 37,735 Fees and charges 60, ,747 9,3 12,801 Directors remuneration 7,370 2,684 2,324 1,059 Contribution fee to the Deposit Protection Fund 527, , , ,819 Insurance/Life insurance expenses 2,405,371 5,329, Other expenses 1,419, , , ,962 Total non-interest expenses 8,005,942 8,455,136 2,507,147 2,3,342 Income before corporate income tax 3,985,551 2,091,6 1,889,976 1,814,666 Corporate income tax 17 (1,263,763) (609,748) (579,427) (566,613) Net income for the period 2,721,788 1,481,568 1,0,549 1,248,053 Net income attributable to The Bank 2,708,487 1,472,823 1,0,549 1,248,053 Minority interests of the subsidiaries 13,1 8, ,721,788 1,481,568 1,0,549 1,248,053 Earnings per share Basic earnings per share (Baht per share) Weighted average number of ordinary shares (shares) 5,513,664,903 1,934,619,272 5,513,664,903 1,934,619,272 The accompanying notes are an integral part of the..

9 Thanachart Bank Public Company Limited and its subsidiaries Income statements For the nine-month periods ended and (Unit: Thousand Baht except earnings per share expressed in Baht) Consolidated Separate Note Interest and dividend income Loans 9,888,189 2,883,769 3,210,944 2,935,264 Interbank and money market items 632, , , ,8 Hire purchase and financial lease 11,381,073 11,243,816 11,127,442 10,754,572 Investments 3,207,774 1,071,405 1,906,8 1,266,468 Total interest and dividend income 25,109,144 16,064,654 16,514,879 15,800,622 Interest expenses Deposits 4,172,669 3,928,894 2,609,821 3,935,152 Interbank and money market items 377,998 82, ,477 97,019 Short-term borrowings 840, , , ,390 Long-term borrowings 1,210, , , ,359 Total interest expenses 6,602,267 5,352,775 4,489,683 5,394,920 Net interest and dividend income 18,506,877 10,711,879 12,025,196 10,405,702 Bad debts and doubtful accounts 16 (1,353,259) (2,927,845) (727,418) (2,677,539) Loss on debt restructuring (69,510) (32,411) (115,512) (23,6) Net interest and dividend income after bad debts and doubtful accounts and loss on debt restructuring 17,084,108 7,751,623 11,182,266 7,704,533 Non-interest income Brokerage fees 956, , Gain (loss) on investments 380,700 (168,920) 164,149 (49,550) Share of income from investments accounted for under equity method 171, , Fees and service income Acceptances, aval and guarantees 150,861 29,174 33,081 29,174 Discounted income on insurance premium 168, , , ,761 Others 2,151,950 1,265, , ,485 Gain on exchanges and financial derivatives contracts 242, ,603 75, ,603 Gain on disposal of property foreclosed and other assets 112, ,127 49, ,991 Insurance premium/life insurance premium income 7,953,705 10,876, Income on supporting services 43,655 57, , ,422 Other income 864, , , ,203 Total non-interest income 13,196,635 13,801,115 2,514,155 2,079,089 The accompanying notes are an integral part of the.

10 Thanachart Bank Public Company Limited and its subsidiaries Income statements (continued) For the nine-month periods ended and (Unit: Thousand Baht except earnings per share expressed in Baht) Consolidated Separate Note Non-interest expenses Personnel expenses 5,941,9 3,181,856 2,852,140 2,4,320 Premises and equipment expenses 2,404,385 1,333,427 1,195,334 1,111,655 Taxes and duties 423, , , ,932 Fees and charges 200, ,950,192 38,080 Directors remuneration 38,044 18,874 15,553 11,776 Contribution fee to the Deposit Protection Fund 1,376, , , ,560 Insurance/Life insurance expenses 6,195,763 9,480, Other expenses 3,204,183 2,418,724 2,174,090 2,105,938 Total non-interest expenses 19,783,851 17,891,712 7,191,553 6,623,261 Income before corporate income tax 10,496,892 3,661,026 6,504,868 3,160,361 Corporate income tax 17 (3,409,843) (1,1,047) (1,837,836) (861,110) Net income for the period 7,087,049 2,5,979 4,667,032 2,299,251 Net income attributable to The Bank 6,720,013 2,510,361 4,667,032 2,299,251 Minority interests of the subsidiaries 367,036 20, ,087,049 2,5,979 4,667,032 2,299,251 Earnings per share Basic earnings per share (Baht per share) Weighted average number of ordinary shares (shares) 4,241,989,349 1,826,194,374 4,241,989,349 1,826,194,374 The accompanying notes are an integral part of the.

11 Thanachart Bank Public Company Limited and its subsidiaries Statements of cash flows For the nine-month periods ended and (Unit: Thousand Baht) Consolidated Separate Cash flows from operating activities Net income before corporate income tax 10,496,892 3,661,026 6,504,868 3,160,361 Adjustments to reconcile net income before corporate income tax to net cash received (paid) from operating activities Share of income from investments accounted for under equity method (171,379) (104,599) - - Depreciation and amortisation 916, , , ,343 Bad debt and doubtful accounts and loss from debt restructuring 1,422,769 2,960, ,9 2,701,169 Amortisation of premiums (discounts) on investment in debt securities 422,239 (5,032) 86,743 (1,171) Gain from disposal of investments in a subsidiary (24,224) - (21,625) - Decrease in allowance for impairment of investments (18,449) (215,949) (18,037) (96,964) Decrease (increase) in allowance for change in value of investments (98,501) (1,911) 4,075 - Increase (decrease) in allowance for impairment of property foreclosed (40,589) (101,377) 10,645 (97,165) Increase (decrease) in allowance for impairment of land, premises and equipment (1,190) 1,190 (1,190) 1,190 Interest income and other income from the assets transferred for debt repayment (1) (1,903) (1) (1,903) Loss from disposal of equipment 1,516 5, ,723 Unrealised loss on exchange 703, , , ,951 Gain from sales of investment in an associated company - (2,707) - - Increase in unearned premium reserve/life insurance premium reserve 2,785,256 5,561, Increase (decrease) in allowance for impairment of other asset (39,600) 51,533 (57,222) 40,327 Decrease (increase) in other income receivable 23, ,239 (29,859) (176,543) Decrease in fees and rental received in advance (,159) (27,938) (,159) (27,938) Amortisation of deferred income (4,488) (5,734) (4,488) (5,734) Increase in accrued expenses 827, , ,2 361,869 Amortisation of discounts on long-term borrowings 6,009 15, ,024 17,176,556 13,555,526 8,527,015 6,545,539 Net interest income (18,935,125) (10,721,871) (12,112,706) (10,419,555) Cash received from interest income 21,991,871 15,019,644 14,621,405 14,566,933 Cash payment for interest expenses (4,701,775) (4,210,363) (2,932,866) (4,229,677) Income from operating activities before changes in operating assets and liabilities 15,5,527 13,642,936 8,102,848 6,463,240 The accompanying notes are an integral part of the.

12 Thanachart Bank Public Company Limited and its subsidiaries Statements of cash flows (continued) For the nine-month periods ended and (Unit: Thousand Baht) Consolidated Separate Decrease (increase) in operating assets Interbank and money market items 48,670,390 3,154,209 27,021,945 2,122,727 Investments in trading securities 1,004, ,085 - Loans (22,517,101) (7,688,616) (27,099,014) (5,334,416) Property foreclosed 3,741,451 5,714,503 3,238,0 5,392,935 Receivables from clearing house (359,789) 50, Receivables from purchase and sale securities and derivatives (4,771,021) 877,906 (1,595,391) 1,321 Other assets (39,886) (1,069,197) (626,447) 276,398 Increase (decrease) in operating liabilities Deposits (76,994,668) (19,233,450) (46,880,181) (19,532,139) Interbank and money market items (16,405,449) 11,097,048 10,348,458 12,136,093 Payable to clearing house 436, , Payable from purchase and sale securities and derivatives 3,9, ,790 1,817, ,277 Liability payable on demand 506,160 (35,751) 338,204 (35,751) Other liabilities 522, , , ,9 Cash flows from operating activities (46,743,976) 8,389,499 (24,347,389) 1,7,994 Cash paid for corporate income tax (4,4,160) (562,271) (2,413,491) (255,447) Cash received from corporate income tax refundable 4, Net cash flows from operating activities (51,053,644) 7,827,228 (26,760,880) 1,476,547 Cash flows from investing activities Decrease (increase) in investments in securities held for investment 26,639,923 (10,448,436) 18,585,370 (3,989,377) Payment to acquire investment in subsidiaries (58,807,683) - (68,351,917) - Capital returned from a subsidiary - - 4,671 - Cash received from disposal of investments in a subsidiary 212, ,766 - Cash received from sales of investment in an associated company - 84,5 - - Cash received from interest on investments 3,060, ,176 1,288,2 635,352 Cash received from dividend 4, , , ,527 Cash paid for purchase of equipment (442,075) (327,904) (197,333) (271,137) Cash received from disposal of equipment 13,475 4,250 5,283 2,660 Net cash flows used in investing activities (28,891,638) (9,738,983) (47,881,141) (3,114,975) The accompanying notes are an integral part of the.

13 Thanachart Bank Public Company Limited and its subsidiaries Statements of cash flows (continued) For the nine-month periods ended and (Unit: Thousand Baht) Consolidated Separate Cash flows from financing activities Cash received from issued additional share capital 35,790,456 2,000,000 35,790,456 2,000,000 Cash received from borrowings 367,258, ,721,018 3,578, ,923,218 Cash paid for borrowings (2,578,583) (140,657,663) (291,220,995) (141,136,163) Cash paid for interest from borrowings (1,688,780) (1,486,840) (1,371,1) (1,514,2) Cash paid for dividend (1,083,386) (971,387) (1,083,386) (971,387) Cash paid for dividend to minority interest (33,517) (,012) - - Net cash flows from financing activities 87,664, ,116 73,693,714 1,366 Net increase (decrease) in cash 7,719,079 (1,336,639) (948,7) (1,337,062) Cash at beginning of the period 3,720,233 4,140,612 3,719,729 4,140,088 Cash at end of the period 11,439,2 2,803,973 2,771,422 2,803,026 Supplemental cash flows information Non-cash transactions Transfer of property foreclosed from receivables for debt settlement 3,061,474 5,080,441 2,883,729 4,790,739 Accounts payable for purchase of fixed assets 47,056 79,711 13,211 77,085 Bad debt written-off 660,754 1,3,360 0,232 1,106,157 The accompanying notes are an integral part of the.

14 Thanachart Bank Public Company Limited and its subsidiaries Statements of changes in shareholders' equity For the nine-month periods ended and (Unit: Thousand Baht) Consolidated Surplus from Issued and Revaluation Revaluation business Retained earnings paid-up surplus on deficit on combination under Appropriated - Minority share capital Share premium investments investments common control statutory reserve Unappropriated interest Total Balance - as at 1 January 17,346,193 2,100, ,678 (1,387,121) (123,379) 192,649 2,827,480 62,903 21,341,097 Increase in revaluation surplus on investments , ,391 Decrease in revaluation deficit on investments , ,792 Net income recognised directly in equity , , ,047,183 Net income for the period ,510,361 20,618 2,5,979 Total income for the period , , ,510,361 20,618 3,578,162 Dividend paid (Note 13) (971,387) (,012) (1,001,399) Increase in share capital 2,000, ,000,000 Balance - as at 19,346,193 2,100, ,069 (439,329) (123,379) 192,649 4,366,454 53,509 25,917,860 Balance - as at 1 January 19,346,193 2,100, ,523 (381,255) (123,379) 370,019 5,734,597 60,691 27,872,083 Increase in revaluation surplus on investments , , ,840 Decrease in revaluation deficit on investments , (5,7) 18,792 Net income and expenses recognised directly in equity ,987 24, , ,632 Net income for the period ,720, ,036 7,087,049 Total income and expenses for the period ,987 24, ,720, ,582 7,977,681 Dividend paid (Note 13) (1,083,386) - (1,083,386) Increase in share capital (Note 13) 35,790, ,790,456 Increase in equity attributable to minority shareholders of subsidiaries from purchased of a subsidiary company , ,821 Decrease in equity attributable to minority shareholders of subsidiaries from disposal of a subsidiary company (19) (19) Decrease in equity attributable to minority shareholders of subsidiaries (33,517) (33,517) Balance - as at 55,136,649 2,100,694 1,627,510 (357,156) (123,379) 370,019 11,371, ,558 70,653,119 - The accompanying notes are an integral part of the.

15 Thanachart Bank Public Company Limited and its subsidiaries Statements of changes in shareholders' equity (continued) For the nine-month periods ended and (Unit: Thousand Baht) Separate Issued and Revaluation Revaluation Retained earnings paid-up surplus on deficit on Appropriated - share capital Share premium investments investments statutory reserve Unappropriated Total Balance - as at 1 January 17,346,193 2,100, ,693 (537,861) 192,649 1,926,002 21,270,370 Increase in revaluation surplus on investments , ,648 Decrease in revaluation deficit on investments , ,233 Net income recognised directly in equity ,648 0, ,881 Net income for the period ,299,251 2,299,251 Total income for the period ,648 0,233-2,299,251 2,6,132 Dividend paid (Note 13) (971,387) (971,387) Increase in share capital 2,000, ,000,000 Balance - as at 19,346,193 2,100, ,341 (227,628) 192,649 3,253,866 24,9,115 Balance - as at 1 January 19,346,193 2,100, ,976 (192,283) 370,019 4,324,639 26,355,238 Decrease in revaluation surplus on investments - - (25,568) (25,568) Decrease in revaluation deficit on investments , ,4 Net income and expenses recognised directly in equity - - (25,568) 68, ,862 Net income for the period ,667,032 4,667,032 Total income and expenses for the period - - (25,568) 68,4-4,667,032 4,709,894 Dividend paid (Note 13) (1,083,386) (1,083,386) Increase in share capital (Note 13) 35,790, ,790,456 Balance - as at 55,136,649 2,100, ,408 (123,853) 370,019 7,908,285 65,772,202 The accompanying notes are an integral part of the.

16 Thanachart Bank Public Company Limited and its subsidiaries Notes to interim For the nine-month periods ended and 1. General information 1.1 The Bank s information Thanachart Bank Public Company Limited ( the Bank or Thanachart Bank ) was incorporated as a public limited company under Thai laws and its parent company is Thanachart Capital Public Company Limited (herein after referred to as the Parent company ), a public limited company also existing under Thai laws. The Parent company holds percent of the Bank issued shares and the Bank of Nova Scotia ( BNS ) holds percent of the Bank issued shares. The Bank s registered address is 900, Tonson Tower, Ploenchit Road, Lumpini, Pathumwan, Bangkok. The Bank has 256 operational branches ( December : 256 operational branches). All subsidiaries are registered limited or public limited companies under Thai laws and operate their businesses in Thailand. The subsidiaries businesses include commercial bank, securities business, leasing and hire purchase business, non-life insurance business, life insurance business, fund management business and others. 1.2 Thanachart Bank s project to purchase Siam City Bank Plc s ordinary shares with the purpose of transferring Siam City Bank s entire business to the Bank The purchase of the ordinary shares of Siam City Bank Plc. from the Financial Institutions Development Fund The Board of Directors of Thanachart Bank No. 2/2553 dated 1 February passed a resolution to approve Thanachart Bank to purchase 1,005,3,950 shares of Siam City Bank Plc. ( SCIB ) from the Financial Institutions Development Fund ( FIDF ) at a price of Baht per share, or for total of Baht 32,673 million, or percent of the total issued and paid-up shares capital. On 11 March, the Bank signed a share purchase agreement with FIDF to purchase SCIB s shares. On 1 April, the Bank of Thailand ( BOT ) approved the Bank to hold the shares of SCIB in accordance with certain specified conditions, i.e. SCIB is to continue operating as commercial bank but has to return its license within December 2011, the requirements on capital fund calculation, the structure of financial business group, and holding in companies in the financial business group. 1

17 On 7 April, the Annual General Meeting of Thanachart Bank s shareholders for the year passed resolutions to (a) approve Thanachart Bank to purchase SCIB s shares from FIDF, make a tender offer for all shares of SCIB from the other shareholders, and accept the transfer of the entire business of SCIB, including SCIB s employees, and to propose SCIB to delist its shares from the Stock Exchange of Thailand, and Thanachart Bank then to submit a tender offer for SCIB s shares. On 9 April, Thanachart Bank paid FIDF for SCIB s shares, in accordance with conditions in an agreement and, as a result, Thanachart Bank is now a major shareholder of SCIB; and (b) approve a tender offer for all shares of Ratchthani Leasing Plc, an associated company of SCIB, because indirect control over this listed company, as a result of the acquisition of SCIB s shares (according to the Chain Principle) Significant procedures after acquiring of SCIB s shares from FIDF Rights offering of additional paid-up share capital to shareholders of Thanachart Bank During 8-19 April, Thanachart Bank called up 3,579,045,6 additional shares with a par value of Baht 10, or total of Baht 35,790 million and as a result its issued and paid-up share capital equals to Baht 55,136,649,0. The parent company exercised both its own entitlement and the unexercised entitlement of the minority shareholders, and as a result the parent company increased its shareholding from percent to percent. Offering of subordinate debentures of Thanachart Bank In April, Thanachart Bank issued 6,000,000 units of subordinated, unsecured debentures (Lower Tier II), with a face value of Baht 1,000 each, to the public offering. BOT granted permission for these debentures to be counted as Tier II Capital. In addition, Thanachart Bank issued 7,1,000 units of perpetual non-cumulative subordinated Hybrid bonds (Hybrid Tier I), with a face value of Baht 1,000 each, by private placement to 2 major shareholders of the Bank which are the parent company and BNS. BOT granted permission for these debentures to be counted as Tier I Capital. The objectives of these issues are to provide funds for acquisition of the SCIB s shares and to increase the Bank s capital fund to support future operations. 2

18 1.2.3 Tender offer for ordinary shares of SCIB After acquiring of SCIB common shares from FIDF, Thanachart Bank submitted a tender offer for all shares of SCIB of Baht per share (the same price as Thanachart Bank paid at auction from FIDF). This comprise 1,107,479,726 shares, with a value not exceeding Baht 35,993 million and the tender offer period ran from 29 April to 9 June. During the tender offer period, other shareholders sold 1,091,439,949 shares of common stock, amounting to Baht 35,472 million, or percent of the issued and paidup shares of SCIB. Combined with its existing holding, Thanachart Bank s shareholding in SCIB totals percent. On 9 June, the Board of Directors of Thanachart Bank passed resolutions to approve (a) SCIB to delist of its shares from the Stock Exchange of Thailand; (b) Thanachart Bank to submit a tender offer for SCIB s shares at a price of Baht per share, legally effective when the delisting is approved by the shareholders of SCIB, and the Stock Exchange of Thailand. On 5 August, the extraordinary meeting of SCIB s shareholders approved the delisting, and the Stock Exchange of Thailand granted approval for the voluntary delisting application on 27 August, with the condition that SCIB is obligated to perform the tender offer for SCIB shares in accordance with certain specified conditions. The latest status, Thanachart Bank is currently making the tender offer to existing shareholders, from 17 to 19 November ; and (c) to appoint Thanachart Securities Plc. (a subsidiary company) as financial advisor and to prepare the tender offer for delisting of SCIB s shares Making a tender offer of the common shares in Ratchthani Leasing Plc. from other shareholders SCIB holds percent of the issued and paid-up share capital of Ratchthani Leasing Plc., and so Thanachart Bank had to make a tender offer for all shares of Ratchthani Leasing Plc. held by other shareholders. Thanachart Bank was made a tender offer for 822,593,906 shares at a price of Baht 1.10 per share (the price that financial advisor opines that is a reasonable price) and ran from 29 April to 9 June. During the tender offer period, other shareholders of Ratchthani Leasing Plc. sold 215,000 shares of common stock, or 0.03 percent of the issued and paid-up shares. As a result, Thanachart Bank s shareholding in Ratchthani Leasing Plc. is 0.03 percent of issued shares, and as a result, Thanachart Bank and SCIB hold percent shares in Ratchthani Leasing Plc., and also treated as an associated company of Thanachart Bank. In addition, on June, the Board of Directors of Thanachart Bank passed a resolution approving a decision not make a second tender offer for the remaining shares of Ratchthani Leasing Plc. 3

19 1.2.5 Key operational plan after the tender offer of SCIB s shares The Bank and SCIB together set plans, in preparation for the entire business transfer of SCIB s business, including a business plan for the period after the transfer, to be acted on after BOT approval. Once BOT approves the plan, both the Bank and SCIB are to hold extraordinary general meetings of their shareholders in order to propose the plan for approval. Thanachart Bank is currently preparation the plans and expects to be able to complete the entire business transfer in 2011, and upon completion the Bank will return SCIB s banking licenses to BOT and proceed with the liquidation process of SCIB Allocating the cost of a business combination Thanachart Bank invested in SCIB s shares at percent on 9 April, and at the same day, the Thanachart s management are assigned to be the SCIB s directors at the portion that Thanachart will have control over voting right of SCIB. Because of Thanachart Bank has control over SCIB through shareholding and management, Thanachart Bank has considered the SCIB s shares as investments in subsidiary company since then. In addition, in June, Thanachart Bank purchased additional ordinary shares of SCIB increasing its shareholding to percent, at a total cost of Baht 68,145 million, with direct expenses related to business combination amounting to Baht 206 million, including expenses of Baht 34 million that were paid to a subsidiary company of Thanachart Bank. Total cost of investments thus total Baht 68,351 million in the separate (or Baht 68,7 million in the consolidated ). For the purpose of allocating the cost of a business combination, the Bank s management estimated the initial fair value of each assets and liabilities as at 9 April, as follow: 1. Assets and liabilities in SCIB s account were valued and noted that the fair value of assets and liabilities of SCIB as at investment payment date totaled of Baht 45,685 million, which was Baht 1,4 million higher than book value. 2. Intangible assets are assets that will generate future economic benefits. Thanachart Bank estimated the fair value of the intangible assets of SCIB at Baht 4,100 million, comprised of (a) Core Deposit Intangibles which were evaluated using the incremental cash-flows from low cost deposit, and considering the cost saving from current and saving deposits; (b) Customer Relationships, which were valued on the base of future revenues that will be earned from SCIB s existing customers. 3. For specific and contingent liabilities, Thanachart Bank estimated these and concluded that no contingent liabilities need to be recognised. 4

20 The acquisition of ordinary shares of SCIB on 10 June is a transaction under the Securities and Commission Act. Hence, these two share purchase transactions are considered as a single transaction. The Bank therefore used the fair value of assets and liabilities and intangible assets estimated at the first transaction date in computing goodwill for the second purchase transaction. Differences between the cost of business combination and the fair value of assets, liabilities, contingent liabilities and intangible assets in proportion to the shareholding, amounting to Baht 18,533 million, are recognised as goodwill from business combination in the consolidated. The initial estimated fair value of assets and liabilities of SCIB and its subsidiaries and the carrying value of each significant account as at the date Thanachart Bank has control over SCIB are as follow: Book value Fair value Intangible assets 293 4,393 Other assets 435, ,016 Total liabilities 391, ,495 Minority interest Net assets value 44,371 49,785 Thanachart Bank s interest in fair value of net asset value 49,784 Goodwill from business combination 18,533 Cost of business combination 68,7 Cash flows used in purchase of investment in subsidiaries Cash paid to purchase investments 68,7 Net cash of subsidiaries at purchase date 9,510 Net cash used in purchasing 58,807 In allocating the purchase price, the Bank did not recognised deferred tax liabilities of Baht 1,624 million arising from adjustment of assets to fair value, and did not recognised the SCIB s employee benefits payable under the labour law amounting to Baht 1,0 million, since the two relevant accounting standards are not yet effective. However, the Thanachart Bank has 12 months from the purchase date, or until 8 April 2011, to adjust the estimated fair value of the above transactions and the allocation of the purchase price of the business combination Obligations of FIDF under the Share Purchase Agreement 5

21 The Share Purchase Agreement between Thanachart Bank as the Purchaser and the FIDF as the Seller, dated 11 March, states that the obligations, guarantees, liabilities or indemnities of the Seller to SCIB under any arrangements, agreements or documents in connection with the merger between SCIB and Bangkok Metropolitan Bank Public Company Limited ( BMB ) (the Seller s Obligations ), including funds deposited in accounts opened and maintained with SCIB to compensate for any losses or damages suffered or incurred by SCIB arising out of or in connection with the merger between SCIB and BMB will continue in full force and effect after completion of the sale and purchase of SCIB s shares. Rights and obligations of SCIB related to the Seller s Obligation, including funds deposited in the accounts opened and maintained with SCIB, will be transferred to and/or assumed by Thanachart Bank, with effect from the completion date of the merger and/or consolidation between SCIB and Thanachart Bank. In addition, in case of the liquidation of the Seller, the Seller s Obligations will be transferred and/or assumed by another government agency. 2. Basis of preparation of interim 2.1 These interim are prepared in accordance with Accounting Standard No. 34 (revised 2007) Interim, with the Bank choosing to present condensed interim. However, the Bank has presented the balance sheets, the statements of income, changes in shareholders equity and cash flows in the same form as that used for the annual. The interim are intended to provide information additional to that included in the latest annual. Accordingly, they focus on new activities, events and circumstances so as not to duplicate information previously reported. These interim should therefore be read in conjunction with the latest annual. The interim in Thai language are the official interim financial statements of the Bank. The interim in English language have been translated from the Thai language. 6

22 2.2 Basis of preparation of the consolidated interim a) The basis of interim consolidated is the same as that for the consolidated for the year ended December, and there were no changes in shareholding structure during this period, except for:- (a) The Bank purchased ordinary shares of SCIB from the FIDF in April and purchased additional shares from the minority shareholders in June, as discussed under Note and As a result, the Bank has a percent shareholding in SCIB. The consolidated statements of the Bank included the balance sheet of SCIB and its subsidiaries as at, and the statement of income included income and expenses from 9 April (the date that the Bank assumed control over SCIB) to. The Bank recognised net income of SCIB and its subsidiaries totaling Baht 1,121 million from the date that the Bank assumed control, based on its shareholding interest at each period. For additional information to facilitate evaluation of financial impact of the business combination, proforma consolidated total income and net income of the Bank and its subsidiaries for the period are presented below, inclusive of income and net income of SCIB and its subsidiaries as if business combination had occurred since the beginning of the period. For the nine-month period ended Total income as if business combination occurred on 1 January 44,405 Net income as if business combination occurred on 1 January (exclude adjustment transactions before the purchase date) 8,181 (b) The Bank sold all shares of T Leasing Co., Ltd., to MBK Plc. with a total of Baht 213 million, resulting in the decrease in percentage of holding. The gain on disposal of Baht 22 million was recognised in the separate financial statements and Baht 24 million in the consolidated. 7

23 Therefore, the interim include the of the Bank and the following subsidiary companies. Percentage of holding December Subsidiaries directly held by the Bank Siam City Bank Plc Thanachart Securities Plc Thanachart Insurance Co., Ltd Thanachart Life Assurance Co., Ltd Thanachart Fund Management Co., Ltd Thanachart Broker Co., Ltd Thanachart Group Leasing Co., Ltd Thanachart Management and Services Co., Ltd Thanachart Legal and Appraisal Co., Ltd Thanachart Training and Development Co., Ltd T Leasing Co., Ltd Subsidiaries indirectly held by the Bank National Leasing Co., Ltd Siam City Securities Co., Ltd Siam City Life Assurance Co., Ltd Siam City Asset Management Co., Ltd SCIB Service Co., Ltd b) The consolidated for the nine-month period ended did not include the of a subsidiary, Chada Thong Properties Co., Ltd., in which the Bank has indirectly held by SCIB at 70 percent, because that subsidiary has ceased its operations and is in the process of being liquidated. SCIB has already made a full allowance for impairment in the value of its investment in that subsidiary. 8

24 c) Total assets and total income of the subsidiaries that have significant impact to and are included in the consolidated as at and December and for the nine-month periods ended and, after eliminating significant inter company transactions, are as follows: Total income for the Total assets nine-month periods ended December Siam City Bank Plc. 389,995-9,976 - Thanachart Life Assurance Co., Ltd. 19,560 16,195 4,500 8,955 Siam City Life Assurance Co., Ltd. 10,039-2,125 - Thanachart Insurance Co., Ltd. 4,187 3,217 2,283 2,081 Thanachart Securities Plc. 4,044 3,082 1, Thanachart Group Leasing Co., Ltd. 1,784 2, The separate, which present investments in subsidiary and associated companies under the cost method, have been prepared solely for the benefit of the public. 2.4 Significant accounting policies These interim are prepared using the same accounting policies and methods of computation as were used for the for the year ended December, except for: a) Investments with embedded derivatives A subsidiary company determines the fair value of investment which has embedded derivative by using the fair value as estimated by the seller, with gain/losses arising from revaluation recognised in the statements of income. This method of measurement is in compliance with the BOT s notification. b) Intangible assets arising from business combination and amortisation Intangible assets arising from business combination are determined with reference to the fair value on the business combination date, and have useful lives of approximately 10 years. 3. Adoption of new accounting standards 9

25 During the current period, the Federation of Accounting Professions issued a number of revised and new accounting standards as listed below. 3.1 Accounting standards that will become effective in fiscal years beginning on or after 1 January 2011 (except Framework for the Preparation and Presentation of Financial Statements, which is immediately effective): Framework for the Preparation and Presentation of Financial Statements (revised ) TAS 1 (revised ) Presentation of Financial Statements TAS 2 (revised ) Inventories TAS 7 (revised ) Statement of Cash Flows TAS 8 (revised ) Accounting Policies, Changes in Accounting Estimates and Errors TAS 10 (revised ) Events after the Reporting Period TAS 11 (revised ) Construction Contracts TAS 17 (revised ) Leases TAS 23 (revised ) Borrowing Costs TAS 24 (revised ) Related Party Disclosures TAS 27 (revised ) Consolidated and Separate Financial Statements TAS 28 (revised ) Investments in Associates TAS 29 Financial Reporting in Hyperinflationary Economies TAS (revised ) Interests in Joint Ventures TAS 33 (revised ) Earnings per Share TAS 34 (revised ) Interim Financial Reporting TAS 36 (revised ) Impairment of Assets TAS 37 (revised ) Provisions, Contingent Liabilities and Contingent Assets TAS 38 (revised ) Intangible Assets TAS 40 (revised ) Investment Property TFRS 3 (revised ) Business Combinations TFRS 5 (revised ) Non-current Assets Held for Sale and Discontinued Operations TFRS 6 Exploration for and Evaluation of Mineral Resources 10

26 3.2 Accounting standards that will become effective in fiscal years beginning on or after 1 January 2013: TAS 12 TAS 20 (revised ) Income Taxes Accounting for Government Grants and Disclosure of Government Assistance The management of the Bank and its subsidiaries believe that these standards will not have any significant impact on the for the years in which they are initially applied, except TAS 12 of which the management has yet to complete its evaluation of the impact of such accounting standard in the year when it is adopted. 4. Investments 4.1 Classified by type of investment Consolidated Separate December December Cost/ Cost/ Cost/ Cost/ Amortised Fair Amortised Fair Amortised Fair Amortised Fair cost value cost value cost value cost value Current investment Trading securities Government and state enterprises securities 1,056 1, Private debt securities Foreign debt securities 3,346 3, Domestic marketable equity securities Total 5,040 5,287 1,017 1, Add : Allowance for change in value Net 5,287 1, Available-for-sale securities Government and state enterprises securities 22,553 22,545 14,468 14, ,569 11,572 Private debt securities 3,696 3,755 1,551 1,559 2,109 2, ,000 Foreign debt securities Domestic marketable equity securities Total 27,378 27,453 16,481 16,498 2,712 2,763 12,897 12,908 Add: Allowance for change in value Net 27,453 16,498 2,763 12,908 11

27 Consolidated Separate December December Cost/ Cost/ Cost/ Cost/ Amortised Fair Amortised Fair Amortised Fair Amortised Fair cost value cost value cost value cost value Current investment (continued) Held-to-maturity debt securities - due within one year Government and state enterprises securities 2, , Private debt securities 1, Foreign debt securities 4,870 4,449 4,870 4,449 Total 8,861 5,402 6,785 5,222 Other investment Investment in property fund Total Total current investment - net 41,601 23,022 10,084 18,989 Long-term investment Available-for-sale securities Government and state enterprises securities 23,732 23,965 20,844 20,864 7,446 7,464 19,493 19,513 Private debt securities 5,618 5,802 6,606 6, ,646 4,758 Foreign debt securities 11,857 12,155 5,406 5,667 5,582 5,832 5,406 5,667 Domestic marketable equity securities Listed securities 7,179 7,647 1,637 1, Unit trusts 908 1, Total 49,294 50,598 35,047 35,476 13,944 14,264 29,960,340 Add: Allowance for change in value 1, Less: Allowance for impairment (6) (6) - - Net 50,598 35,476 14,264,340 Held-to-maturity debt securities Government and state enterprises securities 32,742 17,087 17,065 10,455 Private debt securities 5,133 1, Foreign debt securities Total 38,788 18,449 17,065 10,455 Less: Allowance for impairment (89) (89) (89) (89) Net 38,699 18,360 16,976 10,366 Other investment Investment in property fund Domestic non-marketable equity securities Investment in equity securities 1, Unit trusts Foreign non-marketable equity securities Investment in equity securities Investment in receivables purchased Total 2, Less: Allowance for impairment (4) (22) (4) (22) Net 2, Total long-term investment - net 92,266 54,320,604 41,172 12

28 4.2 As at, the Bank and its subsidiaries have a revaluation deficit arising from transfers of investments in debt securities, of which the current balances of Baht 94 million in the consolidated and Baht 114 million in the separate. These are presented in shareholders equity caption. ( December : Revaluation deficit of Baht 164 million in the consolidated financial statements, and revaluation deficit of Baht 177 million in the separate financial statements). 4.3 As at, long-term investments in held-to-maturity debt securities include non-transferable promissory notes, with terms of 10 years counting from and 14 March 2003, amounting to Baht 292 million and Baht 4 million, respectively, which were received as a result of the transfer of non-performing loans of totaled Baht 296 million to Thai Asset Management Corporation ( TAMC ) ( December : Baht 296 million). However, the agreed transfer price received in the form of promissory notes could still be revised up or down after TAMC reviews the price or has the collateral assessed or the price adjusted. As at, the Bank is still unable to estimate the exact amount of such losses. However, the Bank has estimated the contingent of losses arising from the management of non-performing assets at approximately Baht 89 million ( December : Baht 89 million). Such amount has been presented as allowance for impairment under the caption of investments in held-to-maturity debt securities, classified based on the type of promissory note. In addition, the Bank also shares joint responsibility with TAMC for future profits or losses arising from TAMC s management of the non-performing assets as mentioned in Note 21.2 to the. 4.4 Investments in securities in which the Bank and its subsidiaries hold not less than 20 percent of the equity of the investee As at and December, the Bank and its subsidiaries have investments in unit trusts in which the Bank and its subsidiaries hold not less than 20 percent of the units issued, but did not treated as subsidiaries or associated companies because the Bank and its subsidiaries do not have control or influence over the financial and operating policies of these funds, which are independently managed by fund managers in accordance with the details of each fund project, and are under the supervision of the SEC. The Bank and its subsidiaries therefore record them as available-for-sale or other investments, based on their investment objectives. 13