Management Discussion and AnalysisFor the second quarter and the first six-month period ended 30 June 2013 (Audited Financial Statements)

Thanachart Capital Public Company Limited

Tel: 0 2217 8000, 0 2217 8444

Fax: 0 2217 8312

Website: www.thanachart.co.th

Investor Relations

Email: tcap_ir@thanachart.co.th

Tel: 0 2613 6107

Thanachart Capital Public Company LimitedManagement Discussion and Analysis (Audited Financial Statements) Economics Outlook and Competition in Banking Industry

Thai economy in the second quarter of 2013 has expanded by 2.8 percent, slowing down from 5.4 percent in the first quarter of 2013. This was due to the expansion in a decelerate rate of private consumption and private investment which had a negative impact from the termination of government economic stimulus measure such as the first time car buyer program. Moreover, export has contracted from the sluggish global economy recovery. As a result, the National Economic and Social Development Board (NESDB) reduced the GDP growth estimate of the year 2013 to 3.8-4.3 percent. Monetary Policy Committee (MPC) held a meeting on 28-29 May 2013 and had a resolution to reduce the policy rate by 0.25 percent to 2.50 percent per annum to stimulate economic expansion within the predicted inflation. On 10 July 2013 and 21 August 2013, MPC issued a resolution to maintain the same policy rate.

In the second half of the year, loan growth in the commercial bank sector is predicted to slowdown from the first half due to various risk factors such as domestic demand after the termination of stimulus programs. Sluggish recoveries of counterpart economies will slowdown loan growth. However, fiscal investment in infrastructure projects will positively affect Thai economic growth while easing monetary policy will enhance retail lending. Commercial banks remain ever more cautious with liquidity management amidst uncertainties, particularly the quantitative easing (QE) issues in the United States and Japan which have an impact to capital inflow and outflow through out the year. As a result, money market and capital market have been heavily fluctuating recently, although those markets are not the main source of fund of commercial banks.
Major Events1. On 3 May 2013, Thanachart Bank Public Company Limited ("Thanachart Bank") and Prudential Life Assurance (Thailand) Public Company Limited ("Prudential Life Assurance") signed an exclusive bancassurance agreement in introducing life insurance products and services with a 15 years maturity. Thanachart Bank has transferred 328,500,000 ordinary shares equivalent to 100 percent of total paid-up shares of Thanachart Life Assurance Public Company Limited ("Thanachart Life Assurance") to Prudential Life Assurance, a deal totaling to 17,500 million baht, subject to a post-completion adjustment based on agreed terms to reflect the net asset value as at the completion date, with a further payment of 500 million baht payable 12 months after completion.

2. On 10 June 2013, Thanachart Capital Public Company Limited ("the Company") ended the treasury stock repurchase program. The Company's Board of Directors approved of the repurchase in a period from 11 December 2012 to 10 June 2013 with the repurchase amount not exceeding 127,781,636 shares, equivalent to 10 percent of total paid-up shares, with a limit of 3,400 million baht. At the end of repurchase period, the Company has purchased 71,350,000 shares, equivalent to 5.58 percent of total paid-up shares, totaling to 3,398,455,449.41 baht.

Operating results for the second quarter and the first six-month of 2013 Performance Overview of Thanachart Capital Public Company Limited and  Its SubsidiariesIn the second quarter of 2013, Thanachart Group's net profit amounted to 7,712 million baht. This was mainly due to the fact that Thanachart Group sold Thanachart Life Assurance's shares to Prudential Life Assurance, resulting in a realization of a gain on investment after deducting all related expenses and netting of the additional provision in the amount of 5,352 million baht in consolidated financial statements, of which 2,767 million baht was distributed to the Company. After including such gain and the Company's normal business operation, the Company's net profit amounted to 4,078 million baht, an increase of 2,125 million baht or 108.81 percent from the previous quarter. Such gain from disposal of subsidiary positively impacted financial status of the group, including liquidity, capital adequacy, and cost of fund as well as increasing opportunities in developing variety of life insurance products to cover all customers' needs. During this quarter, a special provision was added to enhance financial strength and protect against risks that may arise from the uncertainties in the future. For the first six-month period of 2013, Thanachart Group had a net profit of 11,190 million baht. The Company's net profit was 6,031 million baht, an increase of 3,054 million baht or 102.59 percent from the same period last year.

Net profit increased in the second quarter and the first six-month period of 2013 was mainly due to gain from selling subsidiary company. On a normal business operating basis, net interest income increased due to loan growth and efficient cost of fund management. Non-interest income in the second quarter of 2013 decreased comparing to the previous quarter due to various extraordinary items. Non-interest income for the first six-month period this year improved from the same period last year due to positive business factors and higher cross-selling. Operating expenses increased while other expenses remained stable from effective management. Impairment loss of loans and debt securities increased from the aforementioned special provision.

Key operating results were as follows: