Thanachart Bank eyes ING’s stake in TMB Bank

The Thai bank has been looking at the stake for a few months and is being advised by Citi.

Thanachart Bank, the sixth largest bank in Thailand by assets, is eyeing ING’s 31% stake in TMB Bank, according to a source familiar with the matter.

The Thai bank has been looking at the stake for a few months and is being advised by Citi, which also advised it on the sale of its insurance unit to UK insurer Prudential in 2012.

Thanachart Bank is 49% owned by Canada’s Bank of Nova Scotia, better known as Scotiabank, with the other 51% owned by Thanachart Capital, which is listed on the Thai Stock Exchange.

According to previous media reports, other lenders such as Mizuho and CIMB were also interested in ING's stake. No formal process has started but ING has been testing the market for some time. A sale to a domestic Thai bank is deemed to be easier, given the restrictions over foreign ownership of Thai banks.

According to analysts, the foreign ownership limit of Thai banks is 25%. Central bank approval is required for foreign parties to hold stakes of up to 49% and Ministry of Finance approval is needed for a stake higher than 49%.

However, a deal with Thanachart Bank is far from being a forgone conclusion. Amid the political turmoil that has roiled the kingdom of Thailand for the past five months, a source familiar with the matter said it is unlikely ING would strike a deal to sell its stake in the near future. The Dutch bank is not required to divest its stake by any deadline.

Analysts also feel that Thanachart Bank should focus on integrating Siam City Bank, which it acquired in 2010. "We think that it makes sense for Thanachart Bank to focus on making its integration with Siam City Bank more profitable, rather than spending money on another acquisition," said Monchai Jaturanpinyo, a banking analyst at CIMB Securities.

Jaturanpinyo added that Thanachart Capital’s management said at an analyst briefing on Wednesday that they would not need to make any equity calls in the near future, implying that they are unlikely to make a major acquisition soon.

Thai banks are also facing headwinds, as the prolonged political volatility is hurting economic growth. According to a February 4 report by Fitch, a sharper and more prolonged slowdown is likely to hurt Thai banks, which face a deterioration in asset quality against a backdrop of rising private sector leverage. Household debt rose to 80% of GDP in the third quarter of 2013 from 56% at end 2008, according to the rating agency.

Thailand held elections on February 2 but the process was marred by disruptions from anti-government protestors, with voters in some districts prevented from casting votes. As such, few expect a quick resolution.

Thanachart Capital did not respond requests for comment.

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