Tuesday, August 20, 2019

Ministry readies Bt10 bn for capital increase backing bank merger

Feb 28. 2019
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THE Ministry of Finance has set aside Bt10 billion to finance a capital increase in TMB Bank (TMB) required under its proposed merger with Thanachart Bank (TBank).

Finance Minister Apisak Tantivorawong said that the funds would be drawn from within the ministry and from the state-backed Vayupak Fund.

After the capital increase, the Ministry of Finance’s stake in the combined entity would be slightly smaller than its current 25 per cent holding in TMB, and the ministry's cost in the merged bank is expected to be Bt3 per share. The ministry's cost in TMB is Bt3.80 per share.

“The Ministry of Finance, as the major shareholder in TMB, is considering whether or not the purchase of the capital-increase shares will be beneficial,” Apisak said. “Usually, when a bank is bigger, its returns could be better, as viewed by officials' analysis.

“The ministry may not have the same amount of the current holding in TMB as once a capital increase is done, a portion of new shares will be offered to TBank's shareholders. Therefore, our stake will lower.”

He said the planned merger will strengthen the new bank by achieving higher efficiency and the ministry, as a shareholder, will also gain.

“They (the related parties of both banks) have negotiated for a relatively long period. Finally, they've preliminarily agreed on the planned merger with the signing of a [non-binding] memorandum of understanding [on Wednesday],” Apisak said. “In principle, TMB will acquire TBank and some of its businesses and TBank's shareholders will receive TMB shares and some cash. The estimated result is a bigger bank. Once the bank is bigger, its efficiency will improve.” Whether the planned merger will be completed in time to be forwarded to this current Cabinet is subject to both parties’ working process, the minister said.

An anonymous source from the Ministry of Finance said the ministry has been in discussions involving the merged bank's management structure and plans to have a ministry representative sit as chairman of the board of directors, as is now the case with TMB.


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