ING targets May launch of $1.2 billion Thai bank stake sale - sources

ING Group NV is targeting a May launch for the sale of its $1.2 billion stake in Thailand's TMB Bank , as the Dutch financial services company awaits the end of Malaysia's election to include more bidders, people familiar with the matter told Reuters.

The planned sale of the 31% stake comes as ING sheds assets to repay a 2008 bailout by the Dutch government. It also comes at a time when mergers and acquisition activity in Southeast Asia's banking sector is expected to hit a record level this year.

The May launch is meant to encourage Malaysia's two dominant banks - CIMB Group Holdings Bhd and Malayan Banking Bhd - to join the auction, the people said. The two banks, and any other potential bidders from Southeast Asia's third-largest economy, are expected to hold off on any major moves until a new government is determined. Malaysia has set national elections for May 5.

 

TMB Bank, formally known as Thai Military Bank, is the nation's seventh-largest lender and was previously owned by the nation's army and the son of former Prime Minister Thaksin Shinawatra.

It was established to provide financial services to military personnel and their families, but has long since expanded to serve all customers. The Thai government had to bail out TMB in 2003 after it was saddled with bad loans in the wake of the Thai baht devaluation in 1997.

The Royal Thai Army now owns just 1.4%of TMB but continues to have one representative on the board of directors.

The sources said the auction was also likely to attract interest from Japanese, Chinese and South Korean lenders. The sale could also spark a takeover battle for TMB, which has a market value of $3.8 billion, as the potential buyer would be required to make a mandatory offer for the rest of the bank under Thai law.

The sale would not be without challenges as Thai rules allow one single presence for foreign banks. That policy has delayed the impending sale of General Electric Co's $1.8 billion stake in Bank of Ayudhya to Japan's Mitsubishi UFJ Financial Group Inc .

Foreign banks can buy up to 25% of a Thai bank without central bank approval, but a stake of up to 49% requires approval from the Thai central bank and more than 49% requires approval from the Thai government.

ING has picked J.P. Morgan to find a buyer for the stake in TMB Bank, the sources said.

The sources declined to be identified because the sale plan is not public. ING and J.P. Morgan declined to comment.

"ING has informed us they will appoint a financial adviser to look into the TMB stake," TMB's chairwoman, Saowanee Kamolbutr, said without elaborating. Saowanee is the representative of Thailand's Finance Ministry on the TMB board.

SHEDDING ASSETS

ING, which has been selling assets worldwide to repay a 10 billion euro state bailout, has raised $3.9 billion by shedding parts of its Asian insurance and asset management businesses.

ING, which bought the TMB stake in 2007 for 460 million euros, owns 25.2% directly and 5.84% though non-voting depository receipts. The TMB stake sale plan comes after ING decided to forfeit its option to buy an additional 5% stake in TMB last year, the people said.

Thailand's Ministry of Finance, which bailed out TMB after ANZ pulled out of a deal in 2003 to buy a stake in the Thai lender, holds 26.1% of TMB. The ministry has in the past encouraged ING to buy its stake, sources have told Reuters previously.

"The finance ministry has not chosen an adviser. The ministry wants ING to make a decision first, either to sell or buy," TMB's Saowanee told Reuters.

"However, TMB performance is generally okay and the finance ministry and ING have no rush to sell the stake. The ministry and ING have been good partners for some time."

Thailand's financials subindex has jumped 42.4% since July 2011, with sentiment underpinned by political stability and robust loan growth on the back of a strong economy.

"Several Malaysian banks have expressed interest to go into Thailand, so this is a significant opportunity to do that," said the head of equity research at a bank in Kuala Lumpur.

Shares of TMB Bank did not trade on Monday because Thai financial markets were closed for a public holiday.

M&A ACTIVITY

ING's impending exit from TMB comes as GE is exploring the sale of its $1.8 billion stake in Bank of Ayudhya. Mitsubishi UFJ Financial Group is the frontrunner to buy GE's stake, although the sale is mired in regulatory uncertainty.

Southeast Asian bank M&A activity is set to rise to a record level this year, with about $21 billion worth of deals in the pipeline.

Southeast Asia, home to 600 million people, is forecast by Swiss banking group Julius Baer to boast nearly half a million millionaires by 2015 with investible wealth of $2.2 trillion. That would offer fertile ground for banks at a time when growth in Western markets is seen as limited.

Yet the proportion of working age people with bank accounts in the region pales in comparison to the developed world.

This ratio sits at 20%  in Indonesia and Vietnam and just 10% in Cambodia, while it is above 60% in Thailand and Malaysia, according to the U.S. Agency for International Development. Countries such as Australia and New Zealand have nearly 100% financial reach.