BAY to reap slight gain from HSBC business acquisition
Bank of Ayudhya should see a 2 per cent increase in net profit this year following the acquisition of HSBC retail banking business, according to research by DBS Vickers Securities (Thailand).
Meanwhile, Standard & Poor's Ratings Services announced that it would introduce no change to the Thai bank’s rating though the acquisition would increase the size of the bank’s assets.
BAY has signed an agreement to acquire HSBC Thailand’s retail banking business, including credit cards, personal loans, mortgages and deposits. The acquisition, subject to conditions including shareholder and regulatory approvals, represents an investment of Bt3.6 billion and is expected to be completed within the first quarter.
As at 31 December 2011, HSBC’s retail banking business had total assets of Bt13.4 billion and total liabilities of Bt17.5 billion. As a result of the transaction, BAY’s asset base will grow by Bt17.5 billion or 1.8 per cent, increasing retail loans from 45 per cent to 46 per cent of total loans.
DBS accordingly revised up the loan growth forecast to 11.5 per cent from 10.0 per cent.
“But BAY’s net profit will inch up only 2 per cent following the acquisition. On a positive note, the acquisition will enable BAY to strengthen its position in retail banking in Thailand to serve more than 10 million customers with more than 4.8 million credit cards in circulation,” DBS said
To S&P, the acquisition leads to no change in the rating, “BBB”
“The acquisition is small and is unlikely to affect BAY's credit profile. We expect our riskadjusted capital ratio for the bank to remain moderate in the next two years,” it said.
The deal size is less than 3.5 per cent of the bank’s total capital at the end of 2011, though it fits with BAY’s strategy to increase its retail loan portfolio.
