KUCHING: Prior news reports on Malayan Banking Bhd’s (Maybank) possible acquisition of Bank of Ayudhya are viewed positively as the banking group seeks to strengthen its foothold on the industry in Thailand.
“Maybank is reportedly exploring a banking business opportunity in Thailand. It was reported that the group has emerged as one of the potential buyers of a 33 per cent stake in Bank of Ayudhya, previously owned by General Electric Co,” the research arm of Kenanga Investment Bank Bhd (Kenanga Research) stated in its research report.
To recap, Maybank was also believed to be in talks to acquire a stake in TMB Bank back in April 2012.
Bank of Ayudhya is the country’s fifth largest lender by asset size. It was also noted to have a reasonable balance sheet with non-performing loans ratio of 4.1 per cent and coverage ratio of at 106 per cent respectively.
Although Maybank had been rumoured to be a potential contender for the stake, management has not officially commented on the matter. TA Securities Holdings Bhd (TA Securities) noted that it would be no surprise should Maybank decide to make the acquisition seeing that the group had intended to make a commercial banking presence in Thailand alongside Maybank Kim Eng.
Kenanga Research view the recent news flow positively as Maybank’s move to search for business opportunities in Thailand was within expectations as its strong proforma core capital ratio (CCR) post dividend reinvestment plan of 10.2 per cent positioned the company well for acquisitions.
“Based on General Electric’s current shareholding level of 32.9 per cent and the stock’s five-day volume-weighted average price of 32.80 Thai baht per share, total acquisition price could amount to RM6.5 billion or 65.5 billion Thai baht,” TA Securities estimated.
It explained that this would translate to a PBV of 1.85 times, a slight premium compared with several mergers and acquisitions deals in the 2009 to 2010 period.
With the onset of tighter Basel 3 capital requirements, TA Securities believe that an acquisition of this size could put some strain on Maybank’s capital position. Kenanga Research, on the other hand, explained that Maybank’s profoma CCR of 10.2 per cent should see Maybank ‘well-positioned’ to meet the Basel 3’s minimum requirement of seven per cent.
TA Securities believed that the potential acquisition of Bank of Ayudhya could strengthen Maybank’s foothold in Thailand. The move was also in supportive of the group’s regional aspirations as TA Securities envisaged possible revenue synergies with Maybank Kim Eng.
Kenanga Research concurred, adding that the Kim Eng acquisition had enabled the group to get solid and steady fee-based incomes from the Asean region, including Thailand. As such, a commercial banking platform would further strengthen Maybank’s Thai-presence.
“Bank Ayudya was predominantly a corporate and small and medium enterprise-based bank. However, it undertook a string of acquisitions, namely a card business from AIG, consumer finance company from General Elecrtrics and retail banking business from HSBC Thailand.
“Today, it has a more balanced mix of retail loans, which makes up 48 per cent of the group’s total loans portfolio,” said TA Securities.
Under the assumption that the deal goes through, Bank of Ayudhya would make up approximately 12 per cent of Maybank’s profit before tax (PBT) as well as alter the contribution mix by geography.