Maybank seen as BAY suitor

The potential exit of General Electric Co from Thailand's banking industry is giving Malayan Banking Bhd the chance to claim a foothold in Southeast Asia's second-largest economy.

GE may sell its 33% stake in Bank of Ayudhya Plc (BAY), sources with knowledge of the matter said last week.

Tisco Securities says the sale may create an opening for a foreign takeover of the entire bank, which is the most profitable lender among the 11 SET-listed Thai banks based on net interest margins.

An acquisition of BAY, which has a market value of $6.9 billion, would be the country's largest bank deal, according to data compiled by Bloomberg.

As a top issuer of credit cards and personal loans in Thailand, Bank of Ayudhya may more than double its profits by 2014 as consumer borrowing outpaces demand for credit from businesses, according to Citigroup Inc.

Amid rising car and home purchases, loan growth at BAY accelerated to 14% in the second quarter.

While the Bank of Thailand needs to give permission for any takeover, Maybank's eagerness to expand in Southeast Asia makes it likely to bid for the entire bank, said analysts at ECM Libra Capital Sdn.

"Bank of Ayudhya is an attractive takeover target," said Peach Patharavanakul, an analyst at Tisco Securities. "Thailand's economy now is a story of domestic demand and consumption. Bank of Ayudhya is one of the best bets on this story."

Maybank said in an e-mail that it would not comment on market speculation. However, in an interview with CNBC last Friday, CEO Abdul Wahid Omar said he wanted to acquire a Thai retail bank.

"It will be great if we can have a domestic retail and commercial banking presence in Thailand," he said in the interview.

He said Maybank was keen to expand in Thailand, though didn't say whether the bank would bid for GE's stake.

BAY executives have referred all questions to GE Capital in Singapore, which said in an e-mail that "we regularly evaluate our strategic options for our investments".

Formed in 1945 and listed on the SET in 1977, BAY has counted GE as its top shareholder since 2007, when the US company acquired a 29% stake, later lifting it to 33%.

That investment preceded at least eight takeovers by BAY, including purchases of businesses from GE, American International Group and HSBC Holdings Plc. Those deals turned Bank of Ayudhya into the country's top or second-ranked provider of credit cards, car loans and personal finance, bank filings show. It has 600 branches across Thailand.

"GE has successfully transformed Bank of Ayudhya into one of the country's top lenders, especially in retail banking," said Sasikorn Charoensuwan, head of research at Phillip Securities (Thailand) Plc.

"For any overseas lenders that want to expand in Thailand, Bank of Ayudhya will be a very strong platform."

Bank of Ayudhya has more than doubled in value from GE's initial purchase price of 16 baht a share. GE is considering options including selling the stake, two people with knowledge of the matter said last week, asking not to be identified because the information is private.

BAY's profit, which has surged 115% since 2008, will more than double again by 2014 to 20.7 billion baht, according to an Aug 6 report by Citigroup analyst Kritapas Siripassorn

Its net interest margin, a measure of the profitability of the lending business, was 4.2% last quarter, the highest among 11 Thai banks, data compiled by Bloomberg show.

"It's one of the better banks in Thailand because its more focused on consumer loans, providing better profit margins," said Alan Richardson, a Singapore-based fund manager with Samsung Asset Management Co.

"Buying Bank of Ayudhya will be a fast way of getting into Thailand's top five banks."

Maybank has sought a Thai retail bank since at least August 2011, when CEO Abdul Wahid described the lack of such a business in Thailand as a noticeable gap in its Southeast Asian network.

The bank aims to generate 40% of its operating profit from outside Malaysia by 2015 and wants to be in all the regions' major markets by that date, he said at the time.

"With home and car owners also among Maybank's biggest borrowers, the Malaysian bank is a good match for Bank of Ayudhya and is unlikely to stop at just a 33% stake," said Leong Hon Sze, an analyst at ECM Libra in Kuala Lumpur.

"I dont think it makes sense for them to just have an associate stake. They would want control."

Maybank, with a market value of $23 billion, would need to sell shares to raise funds for a potential takeover, Leong said. After a 60% gain this year, BAY has a market value of 214 billion baht ($6.9 billion).

As many as four overseas banks, including lenders from South Korea, Taiwan and Australia, are interested in investing in Thailand, Bank of Thailand deputy governor Krirk Vanikkul said on Sept 18.

Among foreign banks that control Thai lenders are CIMB Group Holdings Bhd, Malaysia's second-largest lender, and Singapores United Overseas Bank Ltd.

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Source: http://www.news.thethailandlinks.com/2012/09/22/maybank-seen-as-bay-suitor/