TABLE OF CONTENTS Vision and Mission . 2 Financial Highlights . 4 Message from the Chairperson . 6 Message from the Chief Executive Officer . 8 Board of Directors . .36 Board of Directors’ Profile . 38 Chief Officers . 48 Leadership Team . .50 Organization Chart . 54 Thai Economy and Banking Industry . .56 Management Discussion and Analysis . .59 Strategy and Business . .70 Risk Management and Key Risk Factors . 76 Corporate Governance and Management . .80 Shareholders Structure . .111 Statement of The Audit Committee . 112 Report of the Nomination, Remuneration and Corporate Governance Committee . 113 Board of Directors’ Responsibility for Financial Reports . 114 Report of Independent Auditor . 117 Financial Statements and Notes to Financial Statements . 118 Basel II Pillar III Disclosure . 218 Company Information . .249 Investment of TMB in Other Companies . 250 TMB Branches in Bangkok Metropolitan . 251 TMB Branches in Upcountry . 258 TMB Overseas Branches . 266 TMB Currency Exchange Service Offices . 267 TMB Supply Chain and Business Center . 271 Main Correspondent Banks . 272 2 | Vision and Mission Annual Report 2010 Our Vision: T O BE THE LEADING THAI BANK WITH WORLD-CLASS FINANCIAL SOLUTIONS Our Mission: 01 02 Understand our customers and Create shareholder value offer high quality financial services with appropriate and sustainable designed to meet their needs and aspirations shareholder returns TMB Bank PCL Vision and Mission | 3 TO BE THE LEADING THAI BANK WITH WORLD-CLASS FINANCIAL SOLUTIONS 03 04 T rust in employees and provide Create value to society opportunities while operating our business with internationally to develop and perform to their full capabilities accepted standards of good corporate governance as well as reward them based on their performance 4 | Financial Highlights Annual Report 2010 FINANCIALF INANCIAL HHIGHLIGHTSIGHLIGHTS (Unit: THB million) (Consolidated Financial Statements) 2010 2009 2008 2007 2006 (Restated) (Restated) (Restated) (Restated) Selected income statements items Interest and dividend income 18,499 20,481 29,242 33,813 36,159 Interest expenses 6,240 8,074 13,359 17,282 20,970 Net income from interest and dividend 12,259 12,407 15,883 16,531 15,189 Bad debts and doubtful accounts 1,654 2,627 5,076 30,983 13,013 Net interest income after provision 10,605 9,780 10,807 (14,452) 2,176 Non-interest income 6,966 10,077 6,647 6,434 6,209 Non-interest expenses 14,346 17,859 17,114 35,459 20,430 Net income (loss) before income tax 3,225 1,998 340 (43,477) (12,045) Income tax 14 33 87 132 200 Minority interests 9 20 106 136 113 Net income 3,202 1,945 147 (43,745) (12,358) Selected balance sheets items Loans and Accrued Interest Receivable 363,742 369,063 427,582 468,921 546,152 Total Assets 589,592 543,142 601,573 622,026 751,810 Deposits 413,116 407,776 450,297 465,462 568,467 Total Liabilities 539,737 496,385 556,939 577,641 703,877 Shareholders' Equity 49,772 46,682 44,543 43,751 47,422 Minority Interests 83 75 91 634 511 Basis earning per share (THB) 0 .07 0 .05 0 .01 (2 .60) (0 .86) Net income and ROE Net interest income (NII) and NIM THB THB million million 10,000 20% 18,000 7% 4.3% 6.6% 16,531 0.3% 15,189 15,883 0 0% 15,000 6% 147 1,945 3,202 12,407 12,259 -25.1% -20% 5% -10,000 12,000 -12,358 -40% 4% -20,000 9,000 -60% 3% 2.1% 2.4% 2.6% 2.2% 2.2% -30,000 6,000 -80% 2% -40,000 -96.0% -100% 3,000 1% -43,745 -50,000 -120% 0 0% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 █ Net income (LHS) ROE (RHS) █ NII (LHS) NIM (RHS) TMB Bank PCL Financial Highlights | 5 (Unit: THB million) 2010 2009 2008 2007 2006 Key financial ratio Profitability Return on equity (ROE) 6 .6% 4 .3% 0 .3% -96 .0% -25 1. % Return on assets (ROA) 0 .6% 0 .3% 0 .0% -6 .4% -1 7. % Cost to Income 74 .6% 79 .4% 76 .0% 152 .5% 95 .5% Net interest margin (NIM) 2 .3% 2 .2% 2 .6% 2 .4% 2 1. % Liquidity Loan to deposit ratio (LDR) 87 .9% 90 .3% 94 .2% 99 .9% 95 .2% % current and saving accounts to total deposits (CASA) 46 .3% 49 .5% 38 .6% 41 .6% 25 .9% Capital adequancy Tier I 11 .3%* 12 .3%* 12 .3% 10 .5% 7 .3% Capital adequacy ratio (CAR) 16 .6%* 17 .0%* 16 .8% 14 .4% 10 .4% Asset quality Consolidated NPL ratio 8 .3% 12 7. % 14 .3% 16 1. % 11 .3% NPL coverage 57 .0% 57 7. % 65 .8% 68 1. % 51 .3% % excess reserve to performing loan 2 .3% 2 .5% 2 .2% 3 .0% 0 .5% Book value per share (BVPS) 1 1. 5 1 .09 1 .03 1 .02 2 .59 Number of employees 8,750 8,236 9,039 8,700 9,077 Number of branches 455 483 470 470 464 Number of ATMs 2,300 2,257 1,949 1,714 1,751 Note: * based on Basel II’s criteria Tier I and CAR CASA and LDR 18% 16.8% 17.0% 16.6% 60% 102% 99.9% 16% 100% 14.4% 49.5% 50% 46.3% 98% 14% 41.6% 95.2% 38.6% 96% 12% 10.4% 40% 12.3% 12.3% 94% 11.3% 94.2% 10% 92% 10.5% 30% 90.3% 8% 25.9% 90% 7.3% 6% 20% 87.9% 88% 86% 4% 10% 84% 2% 82% 0% 0 80% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 CAR Tier I █ CASA (LHS) LDR (RHS) 6 | Message from the Chairperson Annual Report 2010 MESSAGE FROM THE CHAIRPERSON TMB Bank PCL Message from the Chairperson | 7 The year 2010 marked an important milestone for Thailand and and consumer behaviors. At the same time, TMB reinforces its TMB Bank. Thailand emerged from one of the most difficult contribution to the community through the “FAI-FAH” program political crises to strongly record positive GDP growth of 7.8% which joins forces of our employees and inspired contributors compared to a contraction of 2.3% a year earlier. TMB Bank from the society to build better life skills for inner-city children not only staged a strong 64.6% earnings growth with the and teenagers. 2010 earnings reaching THB 3.2 billion, but also cleaned up our retained losses to close out the legacy from the previous Good corporate governance is of our utmost priority. In 2010 the financial crisis. Board of Directors further improved the corporate governance framework for TMB to ensure strong supervisory roles while In both cases, the country and TMB emerged stronger having supporting the best practices of the market. We are again endured critical challenges. TMB built its strength on the pleased to report that in 2010, TMB received the highest score success of the transformation plan’s “Lay the Foundation” phase of “Excellent” from the Thai Institute of Directors Association during 2008 – 2009. Our 4.2% net growth in performing loans supported by Securities and Exchange Commission and the and simultaneous reduction in non-performing loans (NPL) of Stock Exchange of Thailand, reflecting our intention to continue an additional THB 18 billion representing 8.3% of consolidated to make the difference for all our stakeholders. total loans set TMB on the path to the asset quality level of the Thai market. In line with the new transformation phase We thank our shareholders for their continued trust and support “Differentiate and Grow with Quality” which started in 2010, through this historic transformation journey of TMB. We are TMB has invested in the capability to acquire quality customers grateful to our valuable customers for giving us the opportunity to further enlarge the foundations of our sustained growth. The to make the difference in their lives and aspirations. We are results are already evident in the success of our campaigns certain that with relentless dedication from TMB staff and throughout the year. management, our future vision of ‘the leading Thai bank with world-class financial solutions’ is within reach. Our 2010 achievements in product innovations, improvements in service and rise in brand consideration enabled TMB to contribute even more to our customers and the Thai market. TMB won the coveted FIIA (Financial Insights Innovation Awards) for our product innovations which significantly shifted market Saowanee Kamolbutr Chairperson 8 | Message from the Chief Executive Officer Annual Report 2010 M ESSAGE FROM THE CHIEF EXECUTIVE OFFICER TMB Bank PCL Message from the Chief Executive Officer | 9 When individuals and businesses trust a financial institution with 159% of Bank of Thailand requirements . At the same time, their money, they find reassurance in strength . A strong bank TMB minimized the formation of NPLs through strong risk as a partner means stability, peace of mind and confidence management capabilities . TMB also cleaned up retained losses in the future . of THB 101 .6 billion and share discounts of THB 303 .0 billion . The result — a healthy balance sheet with the ability to pay Starting from our already solid foundation, TMB is getting dividends for the first time in 14 years upon approval from the stronger every day . By strengthening our team of over Bank of Thailand, the Board of Directors, and shareholders . 8,600 employees, TMB is continually improving its financial strength — certainly a key measure for any bank . But there is TMB is committed to sustained profitability, which is vitally much more to what makes us a strong and solid bank .