BANGKOK (Reuters) - Thailand’s TMB Bank Pcl (TMB) (TMB.BK) and unlisted Thanachart Bank (TBANK) said on Friday they have agreed to create the country’s sixth-largest lender with assets of $59 billion in a merger to better compete with rivals in Southeast Asia.
The deal comes as analysts expect the Thai banking sector to take a hit from a slowdown in the domestic economy amid rising global trade tensions, with fee income coming under pressure.
Banking sector consolidation in Asia is expected to pick up as economic growth across the region slows and the lenders grapple with thinning margins, worsening asset quality and rising costs, consultancy McKinsey said in a report last month.
The two Thai banks signed a non-binding agreement earlier this year after the government approved tax incentives for bank mergers.
That allowed Canada’s Bank of Nova Scotia (BNS.TO) to divest its 49% stake in TBANK and record a C$300 million ($226 million) gain. The Canadian lender will own a 5.6% stake in the merged entity, the Thai banks said on Friday.
TMB said it plans to raise 42.5 billion baht ($1.4 billion) from existing investors to finance the acquisition of shares in TBANK from Scotiabank and financial holding company Thanachart Capital Public Company Ltd (TCAP) (TCAP.BK), which owns the remaining 51%.
TCAP will own 20.4% in the merged entity, and other major shareholders will include Dutch bank ING, which will be the single-largest shareholder with 21.3% stake, and the Thai ministry of finance with 18.4%, according to a joint statement.
“This merger is in line with the government’s policy to promote consolidation in the financial sector to enhance the scale and improve market position,” Ministry of Finance Deputy Permanent Secretary Chumpol Rimsakorn said in a statement.
The combined bank is estimated to have over 30% of the hire purchase market, 12% of the loan market and about 10 million retail customers, according to a merger presentation.
The transaction was expected to close in 2021.
Reporting by Chayut Setboonsarng; editing by Darren Schuettler and Stephen Coates