ON FIRST GLANCE it looks like good news. Higher margins see Thai lenders' profits surge, said our headline on a story yesterday reporting that Thai banks have generally enjoyed an earnings recovery in the third quarter. How nice to know. Although one should be careful about combining the words 'bust' and 'bank' too readily, there was no way to avoid doing so in Thailand in 1998. It was a long convalescence that the Thai financial system faced after the 1997 financial collapse but here is evidence at last that the patient may soon be checking out of the hospital. Or is it? A little bell rang in the back of my head when I read this story, something to do with a piece I had earlier read about Thai banks. I found it eventually after trawling through back issues of this newspaper. It was buried in our second business section on Tuesday last week and was about Thai banks buying foreign bond issues. Here is the key sentence: 'For example, they bought 84 per cent of the US$300 million of bonds sold this month by the Philippines' SM Investment Corp.' This is all there was but it immediately set the alarm gongs going off in my head rather than just that tinkle of a reminder bell. Do you remember the late and unlamented Guangdong International Trust and Investment Corp (Gitic)? When it went bust three years ago I happened across a list of the banks it left high and dry. On top of that list was the usual German landesbanks that are always last in and never out, followed by big names like HSBC and Citibank that, in fact, probably sold out in time but left their names in. The unusual feature, however, was a long line of South Korean banks holding, if memory serves me right, about 22 per cent of Gitic's debt. Why Koreans? Simple. Gitic offered high yields and Korean banks were under pressure to get their balance sheets back in shape. Here, they thought, was a good way of doing it. Buy the US dollar obligations of what looked like a Chinese government company that, for some unfathomable reason (ha, ha, little did they know), was offering extraordinarily good interest rates. Hold that paper, harvest the yield and happy days are here again. So they thought. Now I do not say that SM Investments is in financial trouble. I cannot even confirm that it was exactly 84 per cent of that bond issue that Thai banks bought. All I do know is that they are under pressure to get their balance sheets back in shape and high-yielding debt in US dollars is a Siren whose alluring song is difficult to resist if you do not plug your ears to it. I can also not definitely say that their good third-quarter results were the result of foreign bond forays. I have visited enough Thai banks in my career as an investment analyst to know that truth is a commodity, not a virtue, in Bangkok and is so in bank accounts as well as investor relations bafflegab. All that immediately interested me was that I hold some Bangkok Bank paper (yes, I am a sucker for high yields too) and Bangkok Bank was an exception to the trend. Its earnings were down 7.9 per cent in the third quarter. Phew! What a relief. If it is high foreign yields that are now the game in Bangkok, here perhaps is some evidence that Bangkok Bank is not playing the game. It is not proof, mind you, not even strong evidence, but I shall take this port in a storm. As I say, I am only dealing with whisps and hints of what could be going on here but I have in the back of my head a vision of that dealing room in a big US bank as the latest trader comes in from New York. 'Say, Joe, who are the sheep in Asia these days?' 'Well, Chuck, we've run through the Koreans but, thank God, we've got the Thais on board now. They'll take anything. Stuff 'em good.'