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Not so fast on proposed bank merger, Apisak says

Dec 19. 2018
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THE country’s finance chief has hosed down expectations that a proposed merger between TMB Bank (TMB) and Thanachart Bank (TBank) is a done deal.

Finance Minister Apisak Tantivorawong stressed that a deal uniting the two banks with the involvement of a foreign partner has not been finalised.

Apisak said that while representatives of foreign and Thai shareholders of TMB and TBank had met him for discussions on a possible merger of the banks, no conclusion had yet been reached. 

The talks involved the view of the ministry on the tie-up as well as matters such as tax privileges for asset liquidation after any merger proceeded.

“They (both banks) came in for the discussions separately. If they came in together, that means the result has been reached,” Apisak said. “There are several options for a combination of the two banks and the merger is one among these options. They (the two banks) have not told us when the deal will be finalised. If the deal is not done within 2022, they will not obtain tax privileges.”

As the major shareholder of TMB, the Ministry of Finance does not have a policy to sell its stake in the bank, he said. The first option discussed was the merger and the ministry has reviewed whether the value of its holding in the bank will rise, and other retail investors must do the same calculations, he said.

 “If there is a merger, the value of stocks must rise” but if the value of the new entity, once merged, goes down, the ministry will hold the deal, he said, adding “we have to look at the future and see it (the deal) from the vantage point of the shareholder, not the Ministry of Finance.”

Aside from TBank, several banks including Krungthai Bank have had discussions on a possible merger with TMB, Apisak said. “We want banks to merge and become bigger to compete with other banks in the region. But it all depends on the banks. We've paved the way for them,” he said.

An anonymous source from the finance industry said that Scotiabank, a shareholder of TBank, had had discussions with the Ministry of Finance over a possible merger with TMB during the past one to two months. The talks also covered after-merger privileges. Ultimately, if a deal proposal is to succeed it must gain the approval of the shareholders in the two banks targeted for the merger.

Canadian-based Scotiabank is expected to proceed with final negotiations with the ministry soon. Yesterday, TBank had a meeting of its board of directors and Scotiabank made a presentation at the meeting to help define TBank's 2019 strategy. Reportedly, Scotiabank will take this opportunity to finalise the deal during this visit by its representatives to Thailand.

Based on the initial discussions, after the merger, ING Bank is expected to become the biggest shareholder. The Dutch lender would own a third of all stakes in the new bank, while other shareholders - including the Ministry of Finance, TMB and TBank - are expected to dilute their holdings.

The proposed deal is aimed at enlarging both banks' customer base, helping them to expand overseas and compete with local banks in other countries. This is against the backdrop of possible lower business growth for banks in light of technological disruption and increasing competition between banks, including financial and non-financial institutions.

Managing TBank, given its management structure and need for digital technology, for growth would be a difficult task, while TMB has strengths in digital technology for deposits and services, the source said. Once merged, the new bank is expected to become one of the country's leading commercial banks, the source said.

“Negotiations for the shareholding are required on who will hold more, who will sell stakes,” the source said. “Scotiabank may sell its stakes to ING Bank to allow the latter to become the biggest shareholder. One of the new bank's obstacles is that its executives are from the older generations and it could be more difficult for them to transform the bank from an old-style business to digitally based one. Now, TBank's strength lies in its hire purchase portfolio, which could complement the new bank’s offerings after a merger.”


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