Thai bank next?
Adeline Paul RajSat, Jan 08, 2011

Top lender Malayan Banking Bhd (Maybank) is likely to buy a bank in Thailand next as it does not yet have a commercial banking presence in the second-largest economy of Southeast Asia, sources said.

"It's the next obvious move for Maybank, but it won't happen so soon. It will probably start looking (for targets) in the next financial year (which starts on July 1 2011)," one of them told Business Times.

Just two days ago, Maybank announced plans to buy a leading regional brokerage, Kim Eng Holdings Ltd for RM4.3 billion (S$1.81 million), a move that will mark its entry into Thailand.

Kim Eng is ranked the number one broker there, with 41 branches.

Analysts from HwangDBS Vickers Research and RHB Research think it will not be too long before Maybank makes its move.

"With the acquisition of Kim Eng, Maybank has filled its business gaps in investment banking and equities in (Southeast Asian markets). What Maybank lacks now is a commercial bank in Thailand.

"We would expect Maybank to explore a possible expansion in Thailand, so there could be another merger and acquisition (M&A) in the near future," HwangDBS' Lim Sue Lin said in a report yesterday, following an analyst briefing by Maybank's management late Thursday.

Having a commercial bank in Thailand would complete its regional presence. It already has a commercial banking presence in key Southeast Asian markets like Indonesia, Vietnam, Singapore, the Philippines and Cambodia.

"Management did not rule out the possibility of an acquisition of a commercial bank there further down the road, but said that for now, further M&A (merger and acquisition) activity was not on the cards (at least over the next 12 months)," RHB Research analyst David Chong said in a report yesterday.

It would make more sense for Maybank to do an acquisition rather than go in on its own as the market is very localised, analysts said.

Its closest rival CIMB Group Holdings Bhd bought into Bank Thai, giving it a commercial banking presence there as early as 2008. RHB Capital Bhd, meanwhile, has had a bank branch in Thailand since 1964.

Maybank president and chief executive officer Datuk Seri Abdul Wahid Omar told reporters that having Kim Eng there would give the lender "deep insight" into that market.

Thailand, despite occasional political unrest, is still a growth economy. Its government expects economic growth to slow to 4.5 per cent this year after estimated 7.8 per cent growth last year.

Maybank took a break from M&As after an acquisition spree in 2008, when it forked out a total RM12.5 billion to buy Bank Internasional Indonesia, MCB Bank (Pakistan) and An Binh Bank (Thailand).

The Kim Eng purchase marks it comeback.

Maybank's shares, which were suspended on Thursday for it to announce the deal, rose at the start of trade yesterday to reach a high of RM9.24 before closing lower at RM9.00, 0.1 per cent lower than before.

The Singapore-listed Kim Eng, meanwhile, jumped 13 per cent to close at a record high of S$3.04 (RM7.2).

Maybank's cash offer for the broker's shares was S$3.10 (RM7.3) each, which most analysts said was fair given its strong regional platform.

Analysts gave the thumbs-up to the deal and maintained their stock recommendations, most of which were positive.

They said the purchase is not expected to hurt the bank's future dividend payouts as its dividend reinvestment plan helps keep cash reserves healthy.

"We like the deal as it will accelerate Maybank's regional growth prospects in brokerage and investment advisory," HwangDBS' Lim said.

She expects Maybank's net profit to increase by 0.7 per cent assuming it funds the purchase entirely by Singapore-dollar debt.