Scotiabank Partner Thanachart to Buy Siam City Bank (Update4)
March 11, 2010, 4:22 PM EST(Updates shares in sixth paragraph.)
By Anuchit Nguyen and Sean B. Pasternak
March 11 (Bloomberg) -- Thanachart Bank Pcl, a Thai lender partly owned by Canada’s Bank of Nova Scotia, will pay about C$2.2 billion ($2.14 billion) for Siam City Bank Pcl in a two- step purchase to become Thailand’s fifth-biggest bank.
Thanachart, Thailand’s seventh-largest lender by assets, agreed to pay about 32 billion baht ($978 million) for Bank of Thailand’s 48 percent stake in Siam City. Thanachart and Bank of Nova Scotia, which already owned a fifth of Siam City, will later buy the remaining shares, Toronto-based Scotiabank said today in a presentation to investors.
The combined lender will have 660 branches and 18,000 employees, Scotiabank said. It will rank third in branches in the Bangkok area. Both lenders have combined assets of about 857 billion baht, according to data compiled by Bloomberg.
Thailand, which has a population of 66 million people, “is very underbanked,” Michele Kwok, Scotiabank’s senior vice president for Asia/Pacific and the Middle East, said today in a telephone interview. “This is huge for us. I would say it’s transformational for the region.”
Scotiabank, Canada’s third-largest bank by assets, will contribute about C$650 million in cash for the purchase. Thanachart Capital owns 51 percent of Thanachart Bank, while Scotiabank holds the rest. Foreign banks are limited to 49 percent stakes in Thai banks.
Scotiabank rose 3 cents to C$49.15 in 4:10 p.m. trading on the Toronto Stock Exchange.
Scotiabank’s Expansion
Scotiabank has operations in about 50 countries, and does business in 12 Asian markets including Hong Kong, Taiwan and Vietnam. The bank has spent about $2 billion on foreign acquisitions since 2007, expanding in countries such as Chile and Peru.
Chief Executive Officer Richard Waugh told investors this week that Scotiabank will focus on smaller acquisitions in countries where it already operates.
“Management’s consistent approach in making modestly sized acquisitions in countries where the bank has an established presence adds up over time,” RBC Capital Markets analyst Andre- Philippe Hardy said in a note to clients.
The Thai purchase will add about 5 cents a share to earnings in the first year and 10 cents by the third year. The second stage of the takeover will be completed by July, Scotiabank said.
Capital Ratio
The cash investment will reduce the bank’s Tier 1 capital ratio by 12 basis points. At 11.2 percent, Scotiabank has the lowest Tier 1 capital ratio of Canada’s six biggest banks. Tier 1 measures a bank’s capital, including stock and retained earnings, as a percentage of assets.
Thailand’s central bank has sold holdings in commercial lenders it seized during the 1997-1998 financial crisis to recoup the cost of bailouts and spur competition. The government also has stakes in Krung Thai Bank Pcl, the nation’s second- biggest lender, and TMB Bank Pcl.
Shares of Thanachart Capital were suspended from trading in Bangkok, pending the announcement.
--With assistance from Supunnabul Suwannakij in Bangkok. Editors: Tony Jordan, David Scanlan
To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net; Sean B. Pasternak in Toronto at spasternak@bloomberg.net.
To contact the editor responsible for this story: Linus Chua at lchua@bloomberg.net; David Scanlan at dscanlan@bloomberg.net;
