RPT-UPDATE 2-MUFG whets appetite for Thai banks after majority stake bid

Wed Jul 3, 2013 2:58am EDT

* MUFG makes $5.9 bln bid for 75 pct stake in Bank of Ayudha

* Bid likely to win Thai regulatory approval; seen paving way for others

* Ayudha purchase to make ING's sale of $1.1 bln stake in TMB more attractive

* TMB Bank stake could attract bids from Malaysian, Japanese and Australian banks

By Khettiya Jittapong and Denny Thomas

BANGKOK/HONG KONG, July 3 (Reuters) - A $5.6 billion bid by Japan's Mitsubishi UFJ Financial Group(MUFG) for a majority stake in Thailand's Bank of Ayudhya Pcl may pave the way for more foreign acquisitions of Thai banks as regulatory restrictions ease.

Thailand's central bank wants to boost the competitiveness of its banking sector to attract more foreign investment into Southeast Asia's second-largest economy. For foreign lenders keen to tap the region's booming economies, gaining control is key to make their investments worthwhile.

MUFG's deal to buy up to 75 percent of the mid-sized Ayudhya appears likely to win Thai regulatory approval, burnishing the appeal of a $1.1 billion stake in TMB Bank Pcl that Dutch financial services company ING Groep NV is seeking to sell.

Potential buyers for ING's 31 percent stake in TMB have previously shied away from pursuing the deal because they were unsure about gaining control, financial sources said.

"The outlook of Thai banks is interesting given their strong performance," said Adisorn Muangparnchon, an analyst at Phillip Securities. Major Thai banks posted record net profit in the latest January-March quarter due to strong loan growth of about 13 percent from a year earlier.

"For foreign banks, buying a stake in existing banks will be a quicker way for them to enter the Thai market, rather than applying a licence from the central bank," he added.

ATTRACTIVE THAILAND

Under the current regulations, foreign banks can buy up to 25 percent of a Thai bank without central bank approval but that changes if the stake rises to up to 49 percent. More than that requires the approval of the finance ministry.

MUFG, Japan's largest bank, told a briefing on Tuesday it believes Bangkok would "take a favourable view" of its deal to buy the Ayudhua stake. It also said it was considering merging its Thai operations with the domestic lender to comply with Thailand's single presence policy on bank ownership.

Thailand's central bank said it had received notification of MUFG's purchase of Ayudhya. Any Thai approval of the deal would contrast with Indonesia's attempts to roll-back foreign ownership of its banks.

Southeast Asia's largest economy was obliged to sell some of its best lenders after the 1997-98 Asian financial crisis and is now capping foreign ownership at 40 percent, a policy that has complicated attempts by Singapore's DBS Group Holdings to buy a controlling stake in PT Bank Danamon

"Given the fact that the largest banks in Thailand are still in majority-Thai ownership, Thailand is more relaxed about foreigners taking over some of the next-tier banks in terms of size," said PK Basu, regional head of research and economics at Maybank Kim Eng in Singapore.

"I think there will be more activity."

MUFG's acquisition of Ayudhya is expected to renew the interest of Malaysia's two dominant banks - CIMB Group Holdings Bhd and Malayan Banking Bhd - Japan's Sumitomo Mitsui Financial Group and Australian lenders in the TMB auction, banking sources said.

"It has become potentially easier for ING now," said one Hong Kong-based M&A banker familiar with the process, adding that the process might be more complicated because the Thai finance ministry owns a 26.1 percent stake in TMB.

TMB Bank, formally known as Thai Military Bank, is Thailand's seventh-largest lender. ING bought a stake in 2007 for 460 million euros, and now owns 25.2 percent directly and 5.84 percent though non-voting depository receipts. ING decided to forfeit its option to buy an additional 5 percent stake in TMB last year.

Japanese banks and insurers have this year launched deals worth $8.15 billion in Southeast Asia to beat slower expansion at home. MUFG's acquisition of Ayudhya would be the biggest acquisition by a Japanese bank in the region.

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