Sunday, August 16, 2009

Thailand looks to strengthen banking sector with sell-offs

By Tim Johnston in Bangkok

Published: August 17 2009 03:00 | Last updated: August 17 2009 03:00

Thailand plans to sell off large stakes in two small banks with the incentive that foreign investors could secure management control.

The government acquired the stakes in Siam City Bank and ACL Bank in the aftermath of the 1997-8 Asian financial crisis.

"We always said we would consider getting rid of these stakes if it would help strengthen the overall banking sector through bringing in new entrants to the banking sector," Korn Chatikavanij, minister of finance, told the Financial Times.

Mr Korn said he was willing to set aside limits on foreign shareholdings if the right bidder came along.

"I am willing to waive the 49 per cent limit as long as buyers meet our provisos, including that they are world-class institutions which can enhance the quality of competition in the local market place," he said.

The finance ministry holds a 30.6 per cent stake in ACL while the Financial Institutions Development Fund has a 47.6 per cent stake in Siam City, which has Bt422bn ($12.4bn) in assets.

Thailand's Thanachart Bank, which is 49 per cent owned by Canada's Bank of Nova Scotia, has said it is interested in buying the Siam City stake, with analysts valuing the deal at some $600m.

Thanachart, which runs Thailand's largest car loan book, is keen to take advantage of Siam City's corporate and retail business to create what would be the country's fifth-largest bank by assets.

The market expects the Industrial & Commercial Bank of China to make a bid for ACL Bank, which has assets of Bt63bn. Bangkok Bank last month agreed to sell a 19.3 per cent stake in ACL, worth about $35m, to ICBC, the world's largest bank by market value, subject to finance ministry approval.

ICBC has been expanding aggressively over the past three years, buying stakes in banks in Indonesia, Macao and South Africa.

Foreign banks, including HSBC and Standard Chartered, are keen to expand their footprint in the Thai banking sector but are wary of getting into the market without being guaranteed management control.

Mr Korn said that his ministry and the Bank of Thailand were in the process of finalising their second financial sector master plan.

The aim, he said, was to improve competition by strengthening the system rather than broadening it.

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