The Finance Ministry expects investment in TMB Bank to yield a profit after the ministry subscribes to new shares that will be issued to facilitate the planned merger with Thanachart Bank (TBank), a source at the ministry says.
The share price after the merger is expected to improve, giving the ministry a profit, the source said.
The ministry's average cost per share of TMB is 3.86 baht, well above its market price of 2.24 baht yesterday, closing up two satang on the SET.
The subscription price of the newly issued shares sold to the Finance Ministry is not expected to be high, allowing a larger amount of shares to be purchased, the source said.
Upon the recapitalisation, the ministry should remain one of the three largest shareholders in the consolidated bank, the source said.
The Finance Ministry is the largest shareholder in TMB, with a 25.9% stake, while ING has a 25% stake. Thanachart Capital holds a 51% stake in TBank, and Canada's Scotiabank owns the remainder.
Prasong Poontaneat, the finance permanent secretary, said recently that major shareholders of TMB and TBank were expected to sign a memorandum of understanding soon, inching towards a merger. In principle, the merged entity will use TMB's name and TBank will no longer exist.
TMB is the country's seventh-largest bank, with assets of 892 billion baht, while TBank is sixth, with assets worth 1 trillion baht at the end of last year.
The source said TMB's share price has not factored in the bank's profitability, though the bank managed to write off retained losses and recorded a net profit.
In 2018, TMB was the best performer among industry peers, delivering a 34% surge in full-year net profit to 11.6 billion baht, mainly due to gains on investment. The bank recorded gains amounting to 12 billion baht last year, compared with 64 million in the previous year.
In the third quarter of 2018, TMB reported a one-off gain of 11.8 billion baht from the divestment of a 65% stake in TMB Asset Management to Eastspring Investments, the asset management arm of Prudential Corporation Asia.
The source said the Finance Ministry wants ING to be the core in managing the merged bank, as the Dutch firm had a track record of turning around TMB.