HSBC sells Thai retail business to Bank of Ayudhya

HSBC finally sold off its Thai retail banking business to Bank of Ayudhya on Wednesday, the last day of the lunar new year holiday in Hong Kong.

Bank of Ayudhya, Thailand’s fifth-biggest lender by assets, agreed to pay Bt3.6 billion ($112 million) for the business, which includes credit cards, personal loans, mortgages and deposits — for both retail and wealth management clients.

The sale is part of HSBC’s global restructuring, in which it plans to cut 30,000 jobs worldwide during the next two years and refocus on growth markets where it has scale. It had originally planned to close a deal to sell the Thai business to Bank of Ayudhya, which is 33%-owned by GE Money, in mid-January, but the signing was pushed back without explanation.

Thailand’s finance ministry approved new guidelines in December that allow foreign banks to open 20 branches in the country, up from the current one, but HSBC’s retail business there was relatively small and clearly viewed as non-core.

Given the small size of the business, analysts expect the acquisition to have only a small effect on Bank of Ayudhya’s balance sheet, with net profit inching up just 2% after the acquisition, according to a DBS Vickers report. But it will help the Thai bank in its goal of strengthening its position in Thai retail banking, serving more than 10 million customers with more than 4.8 million credit cards in circulation.

Standard & Poor’s (S&P) said yesterday that the acquisition would not affect Bank of Ayudhya’s credit profile or its BBB- rating. It noted that HSBC’s Thai assets, excluding cash, account for only 1.4% of Bank of Ayudhya’s assets (at the end of 2011) and that the deal size is less than 3.5% of its total capital.

“The acquisition fits with BAY’s strategy to increase its retail loan portfolio, which will increase to 46% of total loans after the deal, from 45% now,” said S&P. “The transaction may also provide cross-selling opportunities to the customers acquired from HSBC.”

The deal is subject to approval by shareholders and the Bank of Thailand, and is expected to be completed in the first quarter of 2012.