TMB comes clean on M&A chatter

Local, foreign partners welcome, bank says

After months of merger and acquisition (M&A) rumours, the Finance Ministry has acknowledged that it is exploring potential partners, both local and foreign, for TMB Bank.

Seeking partners for the country’s seventh-largest bank by assets is aimed at sharpening the bank’s competitive edge in the international market.

Amid the changing landscape of the banking sector in the digital age, TMB and other local banks need to reinforce their competitiveness, said Prasong Poontanate, the finance permanent secretary and chairman of TMB’s board.

He said M&A could be the solution and is in line with the Finance Ministry’s policy to strengthen local banks to be able to compete in the regional market.

The cabinet in April approved a royal decree on tax deductions and exemptions in an effort to encourage mergers among Thai banks and create large “champion” banks that are able to compete with foreign banks.

The tax privileges have prompted speculation that the measures are aimed at paving the way for the amalgamation of some banks that have large stakes controlled by the government, while stock analysts have pointed out that a merger between Krungthai Bank (KTB) and TMB is possible because the government owns the lion’s share of both banks.

But heads of both banks have dispelled the rumours, saying the merger talk was groundless.

The Finance Ministry is now the largest shareholder in TMB, holding a 25.9% stake.

Mr Prasong said the Finance Ministry could either hold more or less of TMB, depending on the bank’s opportunities in the longer-term, but the ministry has yet to take a decision.

TMB’s profitability has continued to improve, he said. “Now isn’t suitable timing [for the Finance Ministry] to sell the bank’s shares because it will lead to a loss,” he said. “The ministry has bought TMB shares at an average price of 3.80 baht.”

He repeatedly ruled out a merger of KTB and TMB, saying there is no synergy to be created from the integration of the two banks.

Mr Prasong said another shareholder, ING Bank, has no plans to divest of its 25% stake in TMB.

TMB chief executive Piti Tanthakasem said the bank has not talked with any potential strategic partners and any decision would depend on the major shareholders.

The bank has continued to strengthen its fundamental base through organic growth, he said, adding that it has set aside a high loan-loss provision in preparation for any future shocks.

TMB recently sold its 65% stake in TMB Asset Management (TMBAM) to Eastspring Investments, an asset management arm of Prudential, for 11.8 billion baht.

The proceeds are being used to set aside additional reserves for credit loss to prepare for higher loan-loss reserve requirements under the International Financial Reporting Standard version 9 (IFRS9), to be implemented next year.

“With strong loan-loss reserves, the bank will need to set aside a little bit more in the final quarter and next year,” Mr Piti said.

TMB’s impairment charges for credit loss jumped to 9.39 billion baht for the third quarter this year from 2.39 billion a year earlier. The one-time gain from TMBAM’s share sales contributed to a 179% year-onyear surge in TMB’s third-quarter net profit to 5.59 billion baht.

Mr Piti said the bank’s lending growth is expected to miss the 8% target this year after it expanded a mere 3.3% for the first nine months, largely due to a 6.6% loan contraction in the small and medium-sized enterprise (SME) segment.

“The bank will decelerate housing loan expansion and control it to grow at a singledigit rate this year, in line with the central bank’s new guidance governing the loan segment,” he said.

TMB delivered 13% mortgage growth during the January-to-September period. But Mr Piti said the growth came despite the bank’s strong risk management practice.

TMB shares closed yesterday on the Stock Exchange of Thailand at 2.24 baht, down two satang, in trade worth 403 million baht.

With strong loan-loss reserves, the bank will need to set aside a little bit more in the final quarter and next year. PITI TANTHAKASEM Chief executive, TMB Bank