TBank unlikely to need more capital after sale of insurance unit

With the likely capital increase, the bank may have no need to raise more capital.
Anuwat Luengtaweekul, deputy managing director of TBank, said yesterday that the bank’s Tier 1 capital to total risk-weighted assets would rise to about 11 per cent, which was up with the industrial average of 10-11 per cent and sufficient to meet the new Basel III requirements.
Thanachart Capital, the bank’s major shareholder, reported to the Stock Exchange of Thailand that besides the Bt17.5 billion in cash, the deal included a further payment by the buyer of Bt500 million.
Somjate Moosirilert, president and chief executive officer of TBank, said the deal, subject to regulatory approval by the Office of the Insurance Commission, was expected to close in the first quarter of next year.
TBank has also entered an exclusive bancassurance partnership agreement with Prudential for 15 years in Thailand. The bank will earn fee-based income throughout the term, he said.
Thanachart Group noted in a press release that Prudential’s acquisition of Thanachart Life Assurance was part of its strategy to invest in the Southeast Asian market. Thailand’s life-insurance market is large in premiums, in contrast to Indonesia and Malaysia.
In Thailand, insurance penetration remains low at 2.7 per cent, so there is a room to grow.
From 2007-11, life premiums in the market rose 16 per cent and the bancassurance channel played an important role in the expansion of the life insurance business.
Last year, bancassurance accounted for 50 per cent of total life-insurance premiums, up from 28 per cent a year earlier. Thanachart Life Assurance has written about a million life-insurance policies.
After regulatory approval, TBank and Prudential will offer Prudential’s life-insurance products and training will be given to the bank’s branch employees. About 160 staff of Thanachart Life Assurance will be moved to Prudential.
Thanachart Securities and Citi Group acted as TBank’s financial adviser while Morgan Stanley advised Prudential.
Tidjane Thiam, CEO of Prudential Group, said the company needed to be tops in the insurance business in Thailand, where the economy is growing and penetration was low.
Brendan King, deputy CEO of TBank, said on behalf of the bank’s major investor, Bank of Nova Scotia, that Scotiabank’s presence in Thailand saw expansion.
Somjate said selling Siam City Life Assurance Co was a choice, but there had been no negotiations with any party yet.
As of June 30, Thanachart held assets of Bt920 billion.