10 August 2011 Asia Pacific/Thailand Equity Research Banks

Thailand Banks Sector Research Analysts Thaniya Kevalee 662 614 6219 [email protected] Dan Fineman 662 614 6218 [email protected]

THEME

DPA ... pressure on funding costs manageable Figure 1: Valuation summary

Siriporn Sothikul, CFA 662 614 6217 [email protected]

Rat

Price

EPS

EPS

P/E

P/B

Div.

ROE

(Bt)

(Bt)

grth (%)

(x)

(x)

yld (%)

(%)

Cur

TP

11E

12E 11E 12E 11E 12E 11E 12E 11E 12E 11E 12E

BBL

O

155.0 219.0 16.13 17.34

25

9.6

8.9

1.2

1.1

4.0

KBANK

O

124.5 168.0 12.13 13.91

45

15 10.3

8

9.0

1.9

1.7

3.4

4.0 18.9 19.0

SCB

O

117.0 143.0 9.63 11.17

35

16 12.1 10.5

2.3

2.0

3.4

4.1 18.9 19.4

KTB

O

19.0

21.8 2.16

2.42

62

12

7.9

1.5

1.4

4.6

5.1 17.3 17.4

BAY

N

24.2

31.0 1.97

2.39

36

21 12.3 10.1

1.4

1.3

3.7

4.8 11.4 12.8

8.8

4.4 12.3 12.3

TMB

U

1.8

1.9 0.10

0.13

42

22 17.6 14.4

1.5

1.5

2.8

3.5

TISCO

O

37.5

49.0 4.53

5.19

13

15

8.3

7.2

1.7

1.5

6.4

7.3 20.2 20.7

8.7 10.1

TCAP

N

28.3

37.0 3.54

4.18 -20

18

8.0

6.8

0.9

0.8

3.0

3.6 11.4 12.3

Source: Credit Suisse

The Deposit Protection Agency (DPA) has officially launched its limited insurance scheme this month, with the guaranteed amount being reduced to an eventual limit of Bt1 mn/bank/depositor by August 2012. We see limited risk of panic deposit outflow, and believe any funding cost pressure is manageable. ■ Panic deposit outflow unlikely. Thai banks are operating under a strong regulatory setting, with low NPLs and high capital base. We see limited risk of deposit run even for small banks. ■ Specialised financial institutions are a threat, but only marginal. We estimate that 38% of system deposits will be guaranteed under the DPA scheme. Another 36% can still get full protection through strenuous efforts by all depositors to distribute their deposits across DPA members (which is unlikely). SFIs could be attractive choices for depositors, but with only a 24% deposit market share, we doubt they could accommodate massive deposit inflows. ■ We believe DPA could push up funding cost by 10 bp at the most. Given bills of exchange (B/E) are an effective tool for commercial banks to fight off pressure from SFIs, we estimate that commercial banks’ funding cost will rise by no more than 10 bp, reducing our profit forecast for the sector by just 4%. Meanwhile, we expect the insurance premium of 40 bp to stay for years as DPA builds up high safety margin to increase public confidence. ■ Small banks may gain from deposit movement, although it is unclear now. First, their funding mix is skewed towards B/E and debt instruments— TISCO in particular, with its deposit representing only 20% of total funding. Second, small banks have a combined deposit market share of only 6% compared with 73% enjoyed by the big four banks and 21% by the three mid-sized banks. Therefore, if some depositors spread their deposits across DPA members, we see a potential that small players might see net inflows. DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/ researchdisclosures or call +1 (877) 291-2683. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

10 August 2011

Focus table and charts Figure 2: Deposit Protection Agency Act Effective date Supervised by Initial capital Participants

August 2011 Ministry of Finance Bt1 bn (contributed by the government) Private depository institutions including commercial banks, retail banks, foreign bank branches, finance companies and credit fronciers. Specialised banks require enactment of Royal Decree to participate in the scheme; this might happen in the future. To minimise moral hazard by encouraging market force to take part in monitoring financial disciplines employed by depository institutions. Retail depositors with deposit less than Bt1 mn still get full guarantee. Deposit and accrued interest denominated in Thai Baht, excluding non-residence Baht accounts of nonresidence persons. Per bank per depositor: Bt50 mn Bt1 mn 40 bp (flat rate) Government bonds or government guaranteed debt securities.

Key objective Type of deposits covered Guaranteed amount : - August 2011-July 2012 - from August 2012 on Premium charge Investment option

Source : Deposit protection Agency (DPA), Credit Suisse

Figure 3: Healthy total CAR – low risk of panic outflow

Figure 4: Deposit market share – SFIs have too limited capacity to absorb massive inflow

(%) 40

Foreign bank branches 30

5%

Commercial

20

banks

SFIs

71%

24%

10

MIC

ICBCT

LHBANK

BAY

UOBT

TMB

BBL

STC

KK

SCB

TISCO

KBANK

KTB

TCR

TCAP

0

Source: Company data

Source: Bank of Thailand (BOT)

Figure 5: Pressure on funding cost – marginal impact on

Figure 6: With much smaller deposit market share, small

our 2012 profit forecasts

banks may see net inflows from deposit diversification

(%)

TCAP

TMB

KTB

BBL

Total

BAY

TISCO KBANK SCB

0 Medium sized banks

-3.1

-4 -4.5

-3.9

-3.8

-3.1

21%

-2.7

Small banks

-3.6

6% Big banks

-6.2

73%

-8

-9.7

Source: Credit Suisse

Thailand Banks Sector

Source: Company data

2

10 August 2011

DPA … pressure on funding costs manageable The Deposit Protection Agency (DPA) has officially launched its limited insurance scheme this month, with the guaranteed amount being reduced from Bt50 mn/bank/depositor to an eventual limit of Bt1 mn/bank/depositor by August 2012.

Panic deposit outflow unlikely In our view, the DPA scheme is being introduced at a time of relatively strong regulatory environment, implying that the perceived risk of private financial institutions could be low. The sector NPL ratio and coverage ratio now stand at 3% and 95% compared with 38% and 27% in January 2000, respectively. Thai banks also have strong capital base with their total CAR ranging from 12% to 31%. We thus see limited risk of panic outflow from any commercial bank, large or small, which may trigger deposit run at other banks.

Commercial banks have healthy balance sheets, with low NPLs

Deposit outflow to SFIs should be moderate Under the DPA scheme, we estimate that 38% of total deposits at commercial banks would be guaranteed. Another 36% can still get full protection assuming that all depositors are willing to go through painful efforts to spread their deposits across 36 DPA members (although we think this is an unlikely scenario). The remaining 26% would not be covered under any circumstance. Due to the Lehman crisis in late 2008 and with the current economic vulnerability in the US and Europe, we believe Thai depositors will not consider foreign bank branches as safe havens, leaving only specialized financial institutions (SFIs) as logical choices. We believe that part of this 62% (36%+26%) of deposits could be moved to SFIs to enjoy implicit protection from the government. Still, with only 24% market share, we doubt if SFIs have the capacity accommodate massive deposit inflow.

Some deposit outflow to SFIs is possible … but not worrisome

Cost pressure appears manageable Of late, commercial banks have also been issuing more bills of exchange (B/E) in order to minimise deposit flow to SFIs. B/E is a form of deposit instrument without guarantee, allowing the banks to offer higher yields as they do not have to pay 40 bp insurance premium to the regulator. This strategy helps commercial banks retain deposits and lower pressure on their funding costs. We believe commercial banks will continue offering B/E to their depositors in the face of deposit migration to SFIs as a result of the DPA scheme. Overall, we estimate that commercial banks’ funding cost should rise by 10 bp at the most as a result of the DPA scheme, which reduce our 2012 profit estimates by just 4%. Meanwhile, we expect relatively high insurance premium of 40 bp to stay at least until 2017 as the DPA has build up high safety margin to increase public confidence.

Commercial banks can employ B/E tool to retain deposit … We expect upward pressure on funding cost to be 10 bp at the most

Small banks might be the winners Consensus seems to believe that small banks are the likely losers. We disagree. Although it is hard to predict depositor behaviour at this stage, we see a likelihood of small banks seeing net inflows in the scenario that some depositors choose to spread their deposits across DPA members. First, their funding mix is skewed towards B/E and debt instruments; especially TISCO whose deposit only accounts for 20% of the total funding. Second, small banks have a combined deposit market share of only 6%, while the big four banks and three mid-sized banks command aggregate market shares of 73% and 21%, respectively.

Thailand Banks Sector

We see a possibility of even smaller players gaining from deposit diversification

3

10 August 2011

Sector comparison Figure 7: Valuation comparison Recommendation Bloomberg code

BBL

KBANK

SCB

KTB

BAY

TMB

TISCO

TCAP

O

O

O

O

N

U

O

N

BBL/F TB KBANK/F TB

SCB/F TB

KTB TB

BAY TB

TMB TB

TISCO TB

TCAP TB

Target price (Bt)

219.0

168.0

143.0

21.8

31.0

1.9

49.0

37.0

Stock price - foreign (Bt)

155.0

124.5

117.0

19.0

24.2

1.8

37.5

28.3

41.3

34.9

22.2

14.7

28.1

3.8

30.7

31.0

1,909

2,393

3,399

11,185

6,074

43,529

728

1,278

295,871

297,961

397,705

212,520

146,994

79,658

27,297

36,104

9,889

9,959

13,293

7,103

4,913

2,663

912

1,207

2009A

14.4

20.2

19.2

17.4

22.1

41.0

13.5

7.2

2010A

12.0

14.9

16.4

14.2

16.7

24.9

9.3

6.4

2011E

9.6

10.3

12.1

8.8

12.3

17.6

8.3

8.0

2012E

8.9

9.0

10.5

7.9

10.1

14.4

7.2

6.8

2013E

7.9

7.8

9.3

7.3

8.1

17.0

6.3

4.9

2009A 2010A

8.5

10.1

12.5

9.7

9.1

19.9

6.1

7.9

8.1

8.2

11.1

8.5

6.6

14.8

4.6

4.9

2011E

6.1

6.1

8.4

5.5

5.4

10.8

4.5

4.2

2012E

5.6

5.3

7.2

4.9

4.8

10.3

3.8

3.6

2013E

5.0

4.6

6.2

4.4

4.0

8.6

3.3

2.8

2009A

1.5

2.5

2.8

1.9

1.6

1.7

2.2

1.1

2010A

1.3

2.2

2.6

1.7

1.5

1.6

1.8

1.0

2011E

1.2

1.9

2.3

1.5

1.4

1.5

1.7

0.9

2012E

1.1

1.7

2.0

1.4

1.3

1.5

1.5

0.8

2013E

1.0

1.5

1.8

1.2

1.2

1.4

1.3

0.7

2009A 2010A

2.6

2.0

2.1

2.3

1.4

0.0

4.6

3.3

2.6

2.0

2.1

2.3

2.4

0.8

6.0

4.2

2011E

4.0

3.4

3.4

4.6

3.7

2.8

6.4

3.0

2012E

4.4

4.0

4.1

5.1

4.8

3.5

7.3

3.6

2013E

4.8

4.8

4.5

5.5

5.8

2.9

7.9

5.0

2009A 2010A

1.2

1.1

1.6

0.8

0.9

0.3

1.5

1.7

1.3

1.5

1.8

0.9

1.1

0.6

1.9

1.5

2011E

1.5

1.8

2.1

1.3

1.3

0.8

1.8

1.0

2012E

1.5

1.9

2.1

1.3

1.4

0.9

1.8

1.1

2013E

1.6

1.9

2.1

1.3

1.6

0.7

1.9

1.4

2009A

11.2

12.6

15.5

11.3

7.5

4.2

16.7

17.1

2010A

11.6

15.7

16.4

12.5

9.2

6.6

21.2

16.2

2011E

12.8

20.1

20.0

18.2

11.7

8.9

21.2

12.0

2012E

12.8

20.3

20.6

18.3

13.3

10.4

21.9

12.9

2013E

13.3

20.4

20.6

17.6

15.3

8.4

22.4

15.9

Deposits (Bt mn) Customer loans (Bt mn)

1,446,213

1,182,390

1,126,538

1,295,485

572,270

439,364

44,079

481,391

1,305,049

1,083,094

1,127,975

1,301,012

658,148

378,222

166,032

616,795

Total assets (Bt mn)

1,991,326

1,677,862

1,593,063

1,957,829

870,410

638,557

195,657

862,739

Market cap. to deposit (%)

20.5

25.2

35.3

16.4

25.7

18.1

61.9

7.5

Market cap. to loans (%)

22.7

27.5

35.3

16.3

22.3

21.1

16.4

5.9

Market cap. to assets (%)

14.9

17.8

25.0

10.9

16.9

12.5

14.0

4.2

% upside Number of shr (mn shrs) Market cap. (Bt mn) Market cap. (US$ mn) Valuation ratios P/E (x)

P/PPOP (x)

P/adj.BV (x)

Dividend yield (x)

ROA (%)

ROE (%)

Source: Company data, Credit Suisse

Thailand Banks Sector

4

10 August 2011

Operational data Figure 8: Valuation comparison BBL Loan growth (%)

KBANK

SCB

KTB

BAY

TMB

TISCO

TCAP

2009A 2010A

-3.2

4.4

2.5

2.7

8.3

-13.2

9.8

3.7

9.9

14.4

12.6

16.4

7.5

-1.3

32.2

111.9

2011E

13.0

13.0

18.0

13.0

9.3

9.0

11.4

9.2

2012E

11.0

13.0

14.0

11.0

9.0

9.0

9.4

9.2

2013E

10.0

12.0

12.0

10.0

9.1

9.0

9.5

8.0

2009A

79.8

93.1

94.8

85.7

107.4

85.0

102.6

84.6

2010A

84.8

93.0

93.5

94.4

103.6

80.8

121.0

91.3

2011E

87.5

93.0

93.6

94.5

105.0

91.0

115.0

100.0

2012E

87.5

93.0

93.6

94.5

105.0

92.0

115.0

100.0

2013E

87.5

93.0

93.6

94.5

105.0

92.0

115.0

100.0

2009A 2010A

12.6

10.3

12.3

10.0

11.5

12.3

12.5

14.0

12.5

9.4

11.6

9.9

11.5

11.3

9.9

10.2

2011E

12.4

9.7

11.2

9.8

11.3

11.3

10.2

8.0

2012E

12.2

9.8

11.2

9.7

11.0

11.1

10.3

8.3

2013E

12.2

9.8

11.3

9.7

10.9

10.7

10.5

9.0

2009A 2010A

37.1

40.6

40.9

40.4

30.1

0.0

63.6

23.8

31.0

29.8

35.1

33.0

39.4

20.4

56.7

27.2

2011E

38.8

35.0

41.5

40.4

45.6

50.0

53.0

24.0

2012E

38.9

36.0

42.5

40.3

48.2

50.0

53.0

24.4

2013E

38.3

37.7

41.6

40.5

47.1

50.0

49.7

24.3

2009A

4.9

4.0

4.8

7.9

8.7

14.7

2.5

4.2

2010A

3.6

3.1

3.7

6.1

5.9

9.9

1.8

6.5

2011E

2.6

2.4

2.7

5.2

5.7

8.6

1.7

5.9

2012E

1.9

1.9

2.0

4.4

5.4

7.4

1.6

5.6

2013E

1.4

1.5

1.6

3.8

5.2

6.4

1.5

5.3

2009A 2010A

117.1

91.2

95.7

47.3

73.5

57.7

86.4

87.4

158.9

110.5

107.3

58.8

88.7

57.0

156.8

70.7

2011E

175.0

115.0

110.0

67.0

90.9

59.1

163.6

75.1

2012E

175.0

115.0

110.0

67.0

94.2

61.4

173.5

78.8

2013E

175.0

115.0

110.0

67.0

97.5

65.7

191.9

83.3

Credit cost as % of loans 2009A 2010A

0.7

1.0

0.6

0.6

1.8

0.7

1.4

1.0

0.6

0.7

0.5

0.5

2.0

0.5

1.5

0.4

2011E

0.5

0.6

0.4

0.5

1.6

0.7

1.0

0.9

2012E

0.5

0.6

0.4

0.5

1.5

0.5

1.1

0.9

2013E

0.5

0.6

0.4

0.5

1.4

0.6

1.2

0.9

2009A

2.7

3.2

3.2

2.7

3.7

1.9

4.5

3.5

2010A

2.6

3.5

3.2

2.6

4.6

2.0

4.6

3.6

2011E

3.1

3.9

3.5

3.0

4.6

2.3

4.0

3.3

2012E

3.1

3.9

3.4

3.0

4.5

2.3

4.0

3.4

2013E

3.1

3.9

3.4

3.0

4.6

2.4

4.3

3.6

2009A 2010A

-7.3

3.9

-9.8

-15.3

10.7

-33.7

33.6

26.8

4.9

23.0

11.9

14.2

37.8

34.3

34.2

56.7

2011E

32.7

35.8

33.2

52.9

21.7

37.1

2.8

16.3

2012E

8.6

14.6

15.9

12.1

14.1

4.7

17.8

16.5

2013E

11.7

14.5

15.5

11.1

18.0

20.2

17.7

30.0

2009A 2010A

1.6

-3.9

-3.1

-0.7

54.9

359.1

16.0

84.5

19.6

36.1

16.6

22.4

32.0

64.6

45.3

10.4

2011E

25.2

44.8

35.3

62.3

36.2

41.6

14.2

-19.8

2012E

7.5

14.7

15.9

11.8

21.0

21.9

14.6

18.2

2013E

12.9

14.4

12.9

7.3

24.5

-15.2

14.3

37.9

Loans/deposit + BE (%)

Tier 1 as % RWA

Payout ratio (%)

NPLs ratio (%)

NPLs coverage (%)

NIM (%)

PPOP growth (%)

Net profit (%)

Source: Company data, Credit Suisse

Thailand Banks Sector

5

10 August 2011

Deposit Protection Agency Act Implementation starts this month The Deposit Protection Agency Act was enacted in December 2007 and was supposed to take effect from August 2008. Due to the Lehman crisis in late 2008, however, the government had put off the implementation until now. The DPA scheme is replacing the blanket guarantee on deposits provided by the Financial Institution Development Fund (FIDF), which will be eventually closed down.

Blanket guarantee is coming to an end

The key objective of DPA scheme is to encourage market forces (large depositors) to indirectly take part in creating stability in the financial system while small/retail depositors still get full protection. The guaranteed amount first starts at Bt50 mn/bank/depositor but declines to an eventual limit of Bt1 mn/bank/depositor by August 2012. Other key features of DPA are included in Figure 9. As shown in Figure 10, 99% of depositors will continue to get full protection, although in terms of deposit amount, we estimate that only 38% will remain fully covered (Figure 11) We discuss our logic behind these estimates in the latter section of the report.

Guaranteed amount to drop to Bt1 mn/bank/depositor by August 2012

Figure 9: Deposit Protection Agency Act Effective date

August 2011

Supervised by

Ministry of Finance

Initial capital

Bt1 bn (contributed by the government)

Participants

Guaranteed amount :

Private depository institutions including commercial banks, retail banks, foreign bank branches, finance companies and credit fronciers. Specialised banks require enactment of Royal Decree to participate in the scheme; this might happen in the future. To minimise moral hazard by encouraging market force to take part in monitoring financial disciplines employed by depository institutions. Retail depositors with deposit less than Bt1 mn still get full guarantee. Deposit and accrued interest denominated in Thai Baht, excluding non-residence Baht accounts of nonresidence persons. Per bank per depositor :

- August 2011-July 2012

Bt50 mn

- from August 2012 on

Bt1 mn

Premium charge

40 bp (flat rate)

Investment option

Government bonds or government guaranteed debt securities.

Key objective Type of deposits covered

Source : DPA, Credit Suisse

Figure 10: Deposits by no of depositors

Figure 11: Deposits by amount

> Bt 1 mn 38%

Up to Bt1 mn 99%

> Bt 1 mn 1% Up to Bt1 mn 62%

Source: Bank of Thailand (BOT), Credit Suisse

Thailand Banks Sector

Source: BOT, Credit Suisse

6

Thailand Banks Sector

Figure 12: Depository institutions which are DPA members (36 in total) Commercial Banks

Retail banks

Foreign Banks (Full Branch)

1

Bangkok Bank

1

Land and House Retail Bank

1

2

Krung Thai Bank

2

Thai Credit Retail Bank

2

Credit Agricole Corporate and Investment Bank JP Morgan Chase Bank

3

Siam Commercial Bank

3

Citibank

4

Kasikorn Bank

4

Sumitomo Mitsui Banking Corp

5

Bank of Ayudhya *

5

Deutsche Bank AG.

6

Thai Military Bank *

6

BNP Paribars

7

CIMB Thai **

7

Indian Overseas Bank

8

Thanachart Bank *

8

Mizuho Corporate Bank

9

Tisco Bank

9

The Bank of China

10

Kiatnakin Bank

10

11

United Overseas Bank **

11

12

Standard Chartered Bank **

12

13

ICBC Bank **

13

Bank of America, National Association The Bank of Tokyo-Mitsubishi UFJ The Hongkong and Shanghai Banking RHB Bank Berhad

14

Royal Bank of Scotland NV

15

Oversea Chinese Banking Corp., Ltd Mega International Commercial Bank #

16

Finance Companies and 1 2

Bangkok First Investment and Trust Advance Finance PCL

Credit Foncier Companies 1 2

Lynn Phillips Mortgage Credit Foncier Sahaviriya Credit Foncier

3

Asia Credit Foncier

Note : * With foreign partners, ** foreign owned, # subsidiary of foreign bank. Source: BOT, Credit Suisse

10 August 2011

7

10 August 2011

There are 36 depository institutions that are DPA members as shown in Figure 12. The protection limit of Bt1 mn/bank/depositor offered by Thailand is one of the highest in the world, translating into 6.6x of per capital GDP (Figure 13). Within Asia, only Malaysia provides better protection than Thailand. Figure 14 compares key features of deposit protection scheme in select countries.

Thailand has one of the highest deposit protection relative to GDP per capita in the world

Figure 13: Deposit guarantee amount to per capita GDP (x ) 12 9.8 9 6.6 5.3

6

3

2.0

2.2

2.2

HK

Canada

KR

5.7

5.8

TW

PH

2.9

0.9 0 SG

JP

USA

TH

MY

Source: DPA, BOT, Credit Suisse

Figure 14: Comparison of deposit protection scheme Guarantee

Premium rate

Target fund size

amount (US$)

(% of total deposits)

(% of total deposit)

Singapore

40,607

0.02-0.07

0.3

Hong Kong

64,267

0.0175-0.049

0.25

USA

250,000

0.12-0.45

1.35

Canada

102,082

0.02135- 0.18519

0.4-0.5

Japan

Has not set the limit

125,172

0.082-0.107

South Korea

46,211

0.18

1.5-2

Malaysia

82,850

0.03-0.24

Has not set the limit

Taiwan

104,548

0.03-0.07

2

Thailand

32,971

0.40

1.5-2 (not finalized yet)

Philippines

11,563

0.20

90,000 mn Peso

Source: DPA, Credit Suisse

Thailand Banks Sector

8

10 August 2011

Panic deposit outflow unlikely Strong regulatory setting with low NPL In our view, the DPA scheme is being introduced at a time of relatively strong regulatory environment, implying that the perceived risk of private financial institutions could be low. The sector NPL ratio has significantly declined from 38% in January 2000 to just 3.0% currently (Figure 15) while the NPL coverage ratio has risen from just 27% to 95% during the same period (Figure 16).

A healthy banking system minimises the risk of bank run

Figure 15: System NPL ratio (Bt trn) 2.5

(%) 40 35

2.0

30 25

1.5

20 1.0

15 10

0.5

5 0

NPLs (Bt tn, LHS)

2Q11

3Q10

4Q09

1Q09

2Q08

3Q07

4Q06

1Q06

2Q05

3Q04

4Q03

1Q03

Oct-02

Jul-02

Apr-02

Jan-02

Oct-01

Jul-01

Apr-01

Jan-01

Jul-00

Oct-00

Apr-00

Jan-00

0.0

NPLs as % of loans (%, RHS)

Source: BOT, Credit Suisse

Figure 16: System NPL coverage (%) 100

80

60

40

20 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* Note: Data for banks under Credit Suisse coverage. Source: Company data, Credit Suisse

Thailand Banks Sector

9

10 August 2011

Individual banks have strong balance sheets Not only the system ratios look healthy, we also found that NPL ratios at individual commercial banks are not worrisome (Figure 17). TMB has the highest NPL ratio (8.6%) but this could be exaggerated by depressed loan growth over the past few years as a result of business restructuring which is still ongoing. Most of TMB’s NPLs are legacy and the bank has already disposed of the weakest NPLs over the past few years. TBANK’s relatively high NPL ratio (6.6%) was mainly from SCIB. The merger between the two have slowed the NPL resolution process.

NPL ratios at individual banks are not worrisome

Finally, commercial banks have healthy capital, with total CAR ranging from 12% to 31% (Figure 18), versus an 8.5% minimum requirement set by the BOT. Therefore, we see limited risk of panic deposit outflow once the guaranteed limit falls to Bt1 mn/bank/depositor even for smaller players. This is a crucial factor, as we believe if one or two banks in the system face deposit run due to low depositor confidence, it could have spill-over effects on other banks.

Banks, big or small, also have adequate capital

Figure 17: NPL ratios – not worrisome

Figure 18: Healthy total CAR

(%) 10.0

(%) 40

8.6

7.5

30

6.6 5.1 5.3

5.0

2.5 0.9

2.0

1.5 1.6

2.5 2.7 2.8

3.1 3.1 3.3

20

3.7

10

MIC

ICBCT

LHBANK

UOBT

BAY

TMB

STC

KK

BBL

TISCO

SCB

KBANK

KTB

TCAP

TMB

TBANK

BAY

KTB

KK

BBL

SCB

UOBT

KBANK

MIC

ICBCT

TCR

TISCO

LHBANK

STC

Source: Company data

TCR

0

0.0

Source: Company data

Figure 19: Sound credit rating Rating

Outlook

Rating agency

TISCO

A

Positive

TRIS

BAY

AA-

Stable

TRIS

KBANK

AA

Stable

FITCH, National credit rating long-term

TMB

A+

Stable

TRIS

TCAP

A+

Positive

TRIS

BBL

AA

Stable

FITCH, National credit rating long-term

KTB

AA+

Stable

FITCH, National credit rating long-term

SCB

AA

Stable

FITCH, National credit rating long-term

KK

A-

Positive

TRIS

Source: Company data, Credit Suisse

Thailand Banks Sector

10

10 August 2011

Deposit outflow to SFIs should be moderate 38% of system deposits to get full coverage Figure 20 and Figure 21 show the structure of deposits, by amount, for commercial banks registered in Thailand and for foreign bank branches, respectively, collated by the BOT. The two combined represents system deposit. As the BOT data provides number of accounts rather than number of depositors, we have adjusted the data in order to minimise distortion caused by possibility that one depositor may have more than one bank accounts. Figure 20: Deposit structure – commercial banks registered in Thailand 1

2

3

4

5

6

Average/

Remain banks

Potential move

No

w/guarantee w/in 35 institutions

guarantee

No. of

Amount

account

Depositors*

(Bt mn)

(Bt)

(Bt mn)

69,065,440

315,045

4,562

315,045

> 50,000-100,000 baht

3,223,862

230,777

71,584

230,777

> 100,000-200,000 baht

2,495,662

347,013

139,046

347,013

> 200,000-500,000 baht

2,085,701

661,828

317,317

661,828

> 500,000-1,000,000 baht

923,517

673,728

729,524

673,728

> 1-10 million baht

585,471

2,258,715

3,857,946

585,471

1,673,244

> 10-25 million baht

23,451

703,673

30,006,098

23,451

680,222

> 25-50 million baht

5,111

446,971

87,456,171

5,111

178,878

262,982

> 50-100 million baht

1,451

332,569

229,278,869

1,451

50,768

280,351

> 100-200 million baht

368

250,351

680,301,630

368

12,880

237,103

> 200-500 million baht

88

266,371

3,030,386,803

88

3,077

263,207

> 500 million baht

39

571,445

14,727,963,918

39

1,358

570,048

78,410,160

7,058,486

90,020

2,844,369

2,600,426

1,613,691

40.3%

36.8%

22.9%

Deposit by size 100,000-200,000 baht

6,144

846

137,695

846

> 200,000-500,000 baht

6,953

2,278

327,628

2,278

> 500,000-1,000,000 baht

5,267

3,796

720,714

3,796

> 1-10 million baht

8,416

43,959

5,223,476

8,416

35,543

> 10-25 million baht

1,282

40,288

31,425,897

1,282

39,006

> 25-50 million baht

550

50,227

91,388,282

550

19,236

30,441

> 50-100 million baht

240

56,462

234,964,628

240

8,411

47,811

> 100-200 million baht

95

66,485

699,842,105

95

3,325

63,065

> 200-500 million baht

30

90,908

3,071,216,216

30

1,036

89,842

> 500 million baht

12

162,539

13,322,868,852

12

427

162,100

85,282

518,526

6,080,108

18,282

106,984

393,260

3.5%

20.6%

75.8%

Total % of total deposit amount

* Adjusted from No. of deposit accounts given by BOT. Source: BOT, Credit Suisse

Thailand Banks Sector

11

10 August 2011

Based on adjusted BOT data, we estimate that only 38% of the total deposit amount (commercial banks registered in Thailand and foreign bank branches combined) falls into the Bt1 mn or below category and thus will continue enjoying full protection from August 2012 (column 4 of Figure 20 and Figure 21).

All retail depositors would continue to be fully protected

Thus, 62% of system deposit would not be covered under the DPA scheme. Still, 36% of this can get the full protection assuming that all depositors take painstaking efforts to place Bt1 mn across all 36 DPA members (column 5). In reality, we find this scenario as unlikely; some may do so and some may spread their deposits among selected rather than across the entire DPA members.

Spreading deposit across DPA members can increase protection substantially but may not be practical to implement

The remaining 26% of system deposit would not get the guarantee under the DPA scheme under any circumstance (column 6).

SFIs could be logical choices for depositors Due to the Lehman crisis in late 2008 and with current economic vulnerability, we doubt if Thai depositors feel more comfortable putting their money with foreign bank branches than with Thai commercial banks. In fact, foreign bank branches have seen their deposit market share falling from 7.4% in 2007 to 5.2% in May 2011 (Figure 22).

Foreign bank branches no longer safe havens

To seek additional protection beyond the DPA scheme, we see a potential that depositors may wish to move the uncovered deposit (including column 6 and part of column 5) to specialised financial institutions (SFIs) owned by the Ministry of Finance (MOF). Although there is no explicit deposit guarantee, we view the market SFIs as being safe havens due to the government ownership. As shown in Figure 23, SFIs have raised their deposit market share from 19.4% in 2007 to 24.4% in May 2011; the increase in market share during this period was due to their more aggressive lending targets rather than concerns about the DPA scheme.

SFIs are the only logical choices (to get full government guarantee)

Figure 22: Foreign bank branches deposit market share

Figure 23: SFIs’ deposit market share

(%)

(%)

8.0

25

7.5

7.4

7.4

24.4

24

7.1

7.0

23

6.5

22

6.0

21.9

21

5.7

5.5

23.5

23.6

5.1

5.1

5.0

5.0

20

5.2

19

19.4

19.0

18

4.5 2005

2006

Source: BOT

Thailand Banks Sector

2007

2008

2009

2010

1Q11 May -11

2007

2008

2009

2010

1Q11

May -11

Source: BOT

12

10 August 2011

Figure 24: Deposit market share by institution

Foreign bank branches 5%

Commercial banks 71%

SFIs 24%

Source: BOT

But we expect only moderate impact Still, with only 24.4% market share, we doubt if SFIs have the capacity to accommodate massive inflows from commercial banks and foreign bank branches (Figure 24). As shown in Figure 25, the three leading SFIs – Government Savings Bank (GSB, Not listed), Government Housing Bank (GHB, Not listed) and Bank for Agriculture and Agricultural Cooperation (BAAC, Not listed) – command 96% of the total deposit at SFIs. Of the three, only GSB has the real capacity to gain market share from the commercial banking system, in our view. GSB has raised its deposit market share from 42% in 2005 to 48% by 2010, while GHB and BAAC have seen their shares falling from 27% and 31% to 22% and 30%, respectively (Figure 26). We thus believe that among SFIs, only GSB pose the real threat to commercial banks. Figure 25: SFIs’ deposit breakdown

SFIs could not cope with massive inflows in our view

Figure 26: GSB, GHB and BAAC deposit share movements (%) 60 50

BAAC

GHB

28%

21%

48 42

40 Others

31

27

30

30

22

4%

20 GSB 47%

10 0 GSB

GHB 2005

Source: Company data, BOT

Thailand Banks Sector

BAAC 2010

Source: Company data

13

10 August 2011

Cost pressure appears manageable Fighting off SFIs competition with B/E Apart from the relatively small share of SFIs discussed earlier, we believe commercial banks can employ the B/E strategy to help retain deposit. As shown in Figure 27, system B/E as a percentage of total funding has increased from just 2% in January 2007 to 14% in May 2011. Excluding B/E, SFIs’ deposit market share would have been higher at 27%.

Banks have been more aggressive in B/E issuances

Figure 27: B/E as a percentage of commercial banks’ total funding (%) 16

12 8

4

Mar-11

May-11

Jan-11

Sep-10

Nov-10

Jul-10

Mar-10

May-10

Jan-10

Nov-09

Jul-09

All Commercial banks

Sep-09

May-09

Jan-09

Mar-09

Nov-08

Jul-08

Sep-08

May-08

Jan-08

Mar-08

Nov-07

Jul-07

Sep-07

May-07

Jan-07

Mar-07

0

Thai commercial banks

Source: BOT, Credit Suisse estimates

To meet their aggressive government-induced lending targets over the past few years, SFIs have been offering attractive spreads over commercial banks’ deposit rates (Figure 28). To match or beat SFIs’ rates, commercial banks resort to B/E (Figure 29). B/E has no deposit protection from the government and thus banks do not have to pay 40 bp insurance premium. The general practice is that banks give away 25-30 bp to depositors and keep 10-15 bp, but during the period of intensifying competition banks may be willing to give all to depositors. In sum, B/E has helped commercial banks retain some deposit and minimise cost pressure. Figure 28: SFIs have offered more attractive deposit rates (%) Spread 3.0

(bp)

50

14 2.6

Figure 29: Commercial banks’ B/E rates match or beat SFIs’ (%) 3.0

2.5

2.2

2.0

2.4

2.5

2.5

2.6

2.5

2.6

1.7

2.0

1.0

30 2.5

2.5

1.5

28

Without guarantee on principal, B/E yields are more attractive than normal deposits

2.0

1.25

2.0 0.75 1.5

0.5 0.0 Sav ing rate

3-m deposit SFIs

Source: Company data, Credit Suisse

Thailand Banks Sector

6-m deposit CBs

12-m deposit

1.0 3 month

6 month SFI deposit rate

12 month CB B/E rate

Source: Company data, Credit Suisse

14

10 August 2011

We believe that if there is any sign of deposit outflow to SFIs as a result of full implementation of DPA scheme, commercial banks would be more aggressive in B/E offering.

B/E unlikely to come under the DPA scheme Significantly increased B/E offered by commercial banks of late has triggered concerns from the Securities Exchange Commission (SEC) whose prime duty is to protect the interests of small and retail investors with investment or deposit amount of Bt1-2 mn. We expect SEC to launch tighter regulation in B/E issuing procedures—more stringent filing and clarifications to investors of B/E with small minimum requirement, i.e., less than Bt2 mn.

SEC may tighten regulation on B/E in a bid to protect small/retail investors

However, we believe that most B/E investors are rich people with relatively big investment amounts. Take TISCO for instance; the amount per depositor for its B/E product is over Bt30 mn compared with Bt6 mn and Bt0.28 mn for its time deposit and current and savings (CASA) products, respectively (Figure 30). Thus, we do not expect SEC’s new regulation to have any impact on commercial banks’ B/E products.

Most B/E investors are rich people with sufficient knowledge on B/E risk

Figure 30: TISCO – deposit amount per depositor (Bt mn) 40 34 30

20

10

6 0

0 CASA

Time

B/E

Source: Company data

The more serious regulatory change that could curb B/E issuance is if the government decided to include B/E in the DPA scheme, practically making it no different than normal deposit. According to our channel checks, we think this is unlikely at least in the next several years. First, we believe the regulators (BOT and DPA) are happy to let depositors have a variety of investment choices. Second, to include B/E requires amendment to the current DPA Act, which could involve a lengthy process.

To include B/E in DPA scheme could produce negative impact on banks

Our sensitivity analysis shows that if the commercial banks were to retain their market shares (implying SFIs’ market share capped at the current 24.8%) by offering more B/E to depositors, B/E as a percentage of their total funding would rise to 29% by 2013, compared with 14% now (Figure 32). Our estimate is based on the assumption that commercial banks’ total funding (deposit + B/E) would grow by 12% p.a. over 2011-13, with deposit growing only at 4% p.a. (in line with the average growth between 2007 and 2010). We believe that B/E, accounting for 30-35% of total banks’ funding, is still acceptable to both DPA and BOT.

But we do not think regulators would implement such policy

Thailand Banks Sector

15

10 August 2011

Figure 31: SFIs’ deposit market share

Figure 32: B/E as % of commercial banks’ total funding (%)

(%) 25.5

24.8

24.8

24.8

35 29.0

30

24.0 23.5

23.6

25

22.5

17.7

20 21.9

11.4

15

21.0 19.4

10

19.5

5

19.0 18.0

7.6

8.8

2008

2009

7.0

0 2007

2008

2009

2010

2011E

2012E

2007

2013E

Source: BOT, Credit Suisse

2010

2011E

2012E

2013E

Source: BOT, Credit Suisse

Funding cost to rise by 10 bp at the most Given the above analysis, we believe that the overall funding cost of commercial banks should rise by no more than 10 bp once the DPA scheme is fully implemented from August 2012. Currently, SFIs offer an average spread of 30 bp above commercial banks’ deposit rates. To account for possibility of some deposit outflow to SFIs, we estimate that the gap should narrow by 20 bp, with 10 bp from SFIs lowering their spread and another 10 bp from commercial banks raising their rates to retain deposits.

We thus expect minimal impact from DPA scheme on banks’ profits

Under this worst-case assumption, our 2012 profit forecast for the sector would decline by about 4%, with TCAP suffering the most (-10%) followed by TMB (6%, Figure 33). Figure 33: Marginal impact on our 2012 profit forecast (%)

TCAP

TMB

KTB

BBL

Total

BAY

TISCO

KBANK

SCB

-3.1

-3.1

-2.7

0

-4 -4.5

-3.9

-3.8

-3.6

-6.2 -8

-9.7 -12 Source: Credit Suisse

Expensive insurance premium likely to stay for years DPA has principally set the target fund size at roughly around 1.5-2% of the total deposits (i.e., 4-5% of deposits covered under the DPA scheme. The key objective is to have sufficient safety margin in order to increase public confidence. Thus, they are likely to maintain a flat insurance premium of 40 bp – this is the highest in Asia (Figure 14)

Thailand Banks Sector

40 bp premium is likely to stay until 2017 at least based upon our estimate

16

10 August 2011

According to DPA, the insurance premium should eventually decline in line with other countries and they could even introduce variable rates based on individual bank risk premium. We believe the flat 40 bp premium is likely to stay at least until 2017 as our analysis suggests this would allow DPA to build up reserves to the target level (Figure 34). Figure 34: Calculation of DPA fund size as a percentage of insured deposit (Bt bn) Total system deposit Premium rate (on total system deposit) (%) Collected premium

Current

2012E

2013E

2014E

7,694

8,001

8,321

8,904

2015E

2016E

2017E

0.40 13

0.40 31

0.40 33

0.40 34

0.40 37

0.40 39

0.40 42

9,527 10,194 10,908

Cumulative premium (fund size)

14

45

78

112

149

189

231

% of total deposit

0.2

0.6

0.9

1.3

1.6

1.9

2.1

% of insured deposit *

0.5

1.5

2.5

3.3

4.1

4.9

5.6

* We estimate that 38% of total deposits are qualified under DPA. Source: BOT, DPA and Credit Suisse

Once the premium rate comes down (which is in too distant future), banks should enjoy higher profitability. TMB is the biggest winner followed by KTB as currently the insurance premium accounts for 30% and 19% of their PPOP, respectively (Figure 35).

TMB, the biggest beneficiary of lower insurance premium

Figure 35: Premium payment as a percentage of PPOP (%) 35 30.0 30 25 19.4

20 15 9.7

10.6

11.1

BAY

SCB

KBANK

13.0

13.5

TCAP

BBL

10 5

4.4

0 TISCO

KTB

TMB

Source: Company data, Credit Suisse

Thailand Banks Sector

17

10 August 2011

Small banks might be the winners We disagree to consensus belief Consensus seems to believe that small banks are definite losers of the DPA scheme. We disagree. Although it is hard to predict depositor behaviour at this stage, we see a likelihood of small banks seeing net benefit in the scenario that some depositors choose to spread their deposits across DPA members.

Small banks are unlikely to lose out

Deposits constitute a smaller part of the total funding than that of big banks First, their funding mix is skewed towards B/E and debt instruments (neither is affected by the DPA scheme); this accounts for 45% of small banks’ total funding, compared with 11% and 25% for big and mid-sized banks, respectively (Figure 36). Among smaller players, TISCO looks to be in the safest position as B/E and debt instruments account for 80% of its total funding (Figure 37). Figure 36: Funding mix by size (%) 100

Figure 37: Funding mix by individuals (%) 100

11

25 45

75

50

Small banks rely less on deposit compared with big banks

75 50

89

75 55

25

25

Deposit

Source: Company data

BE and Debt

BE and Debt

MIC

TCR

LHBANK

ICBCT

TISCO

KK

STC

UOBT

TMB

TCAP

BAY

Small banks

SCB

Medium sized banks

KBANK

BBL

Big banks

KTB

0 0

Deposit

Source: Company data

Small banks have relatively small deposit market shares Second, the eight small commercial banks (and retail banks) have a combined market share of only 6% compared with 73% for the big four (BBL, KTB, SCB and KBANK) and 21% for the three mid-sized players (BAY, TCAP and TMB, Figure 38). Assuming selected big depositors at each bank decide to spread their deposits across DPA members, we believe small banks are likely to gain more than lose. At this stage, it is hard to conclude that this is a definite possibility but we are confident that smaller players would not lose out, as the market expects.

Thailand Banks Sector

With small deposit market share, small players could end up with net inflows from bigger players

18

10 August 2011

Figure 38: Deposit share by size

Figure 39: Deposit share by individuals (%) 25 20

Medium sized banks 21%

15 Small banks 6%

10

Big banks 73%

5

Source: Company data, Credit Suisse

Thailand Banks Sector

MIC

TCR

LHBANK

ICBCT

KK

TISCO

STC

TCAP

UOBT

TMB

BAY

SCB

KTB

KBANK

BBL

0

Source: Company data

19

10 August 2011

Companies Mentioned (Price as of 09 Aug 11) Bangkok Bank (BBLf.BK, Bt155.00, OUTPERFORM, TP Bt219.00) Bank of Ayudhya (BAY.BK, Bt24.20, NEUTRAL, TP Bt31.00) CIMB Thai Bank (CIMBT, Bt2.74, NOT RATED) Industrial and Commercial Bank of China (Thai) (ICBCT, NOT LISTED) Kasikornbank (KBANf.BK, Bt124.50, OUTPERFORM, TP Bt168.00) Kiatnakin Bank (KK.BK, Bt32.25, NOT RATED) Krung Thai Bank (KTB.BK, Bt19.00, OUTPERFORM, TP Bt21.80) Land and Houses Retail Bank (LHBANK TB, Bt1.50, NOT RATED) Siam Commercial Bank (SCB.BK, Bt117.00, OUTPERFORM, TP Bt143.00) Thanachart Capital Public Co Ltd (TCAP.BK, Bt28.25, NEUTRAL, TP Bt37.00) Tisco Financial Group (TISCO.BK, Bt37.50, OUTPERFORM, TP Bt49.00) TMB Bank Public Co Ltd (TMB.BK, Bt1.83, UNDERPERFORM, TP Bt1.90) United Oversea Bank (Thai) (UOBT, NOT LISTED)

Disclosure Appendix Important Global Disclosures Dan Fineman & Thaniya Kevalee each certify, with respect to the companies or securities that he or she analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. Analysts’ stock ratings are defined as follows: Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock’s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward. Analysts’ coverage universe weightings are distinct from analysts’ stock ratings and are based on the expected performance of an analyst’s coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. *An analyst’s coverage universe consists of all companies covered by the analyst within the relevant sector. **The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months. Credit Suisse’s distribution of stock ratings (and banking clients) is: Global Ratings Distribution Outperform/Buy* 48% (61% banking clients) Neutral/Hold* 40% (57% banking clients) Underperform/Sell* 10% (51% banking clients) Restricted 2%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

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Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at anytime after that. For Thai listed companies mentioned in this report, the independent 2008 Corporate Governance Report survey results published by the Thai Institute of Directors Association are being disclosed pursuant to the policy of the Office of the Securities and Exchange Commission: Bangkok Bank(N/A), Bank of Ayudhya(Excellent), Kasikornbank(N/A), Kiatnakin Bank(Very Good), Krung Thai Bank(Excellent), Siam Commercial Bank(Excellent), Thanachart Capital Public Co Ltd(Very Good), Tisco Financial Group(Excellent), TMB Bank Public Co Ltd(Excellent). Taiwanese Disclosures: Reports written by Taiwan-based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. • Dan Fineman, non-U.S. analyst, is a research analyst employed by Credit Suisse Securities (Thailand) Limited. • Thaniya Kevalee, non-U.S. analyst, is a research analyst employed by Credit Suisse Securities (Thailand) Limited. • Siriporn Sothikul, CFA, non-U.S. analyst, is a research analyst employed by Credit Suisse Securities (Thailand) Limited. For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.creditsuisse.com/researchdisclosures or call +1 (877) 291-2683. Disclaimers continue on next page.

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