TMB-TBank entity to focus on core trio

TMB-TBank entity to focus on core trio

Loans for autos and mortgages, advisory

In this picture from Feb 27, 2019, Suphadej Poonpipat, third left, chairman of the executive committee of TBank, and Philippe Damas, third right, chairman of executive directors at TMB, are at the merger signing ceremony. Somchai Poomlard
In this picture from Feb 27, 2019, Suphadej Poonpipat, third left, chairman of the executive committee of TBank, and Philippe Damas, third right, chairman of executive directors at TMB, are at the merger signing ceremony. Somchai Poomlard

The new entity emerging from the integration of TMB Bank and Thanachart Bank (TBank) plans to focus on three core business areas: auto loans, mortgages and financial advisory services.

Auto lending is an area of expertise for TBank and it is the market leader.

TMB has seen a positive performance for mutual funds and bancassurance business during the past 10 years, while it has the lowest non-performing loan ratio for mortgages, said TMB chief executive Piti Tantakasem.

Mr Piti is tipped for the top job with the merged bank.

The merger of TMB and TBank marks the industry's largest merger and acquisition deal, with considerations worth 156 billion baht.

Of that amount, 130 billion baht is fundraising from TMB to buy out TBank, with 26 billion for business restructuring under the deal.

TBank, the industry's sixth largest bank by total assets, has an outstanding amount of auto-hire purchase loans worth 440 billion baht.

TMB saw its fee income from its mutual fund business rise from 2 million baht in 2010 to 2.6 billion in 2018.

The bank also registered an increase in bancassurance fee income by almost seven times from 6 million baht in 2010 to 3.8 billion in 2018.

Mr Piti said the merged bank will better diversify its total loan portfolio, while aiming to reduce the corporate loan portion to 20% from one-third of the total portfolio.

The portion of small and medium-sized enterprise (SME) loans is expected to decline to 20% from above 30% now, and the retail loan portfolio is poised to climb to around 60-70% from 50%.

The new loan portfolio will be gradually adjusted after the integration, he said.

In 2018, TMB allocated loan-loss provisions of 16.1 billion baht, while TBank's provision stood at 4.74 billion.

"Under the different business models of the two banks, where wholesale and corporate loans represent the largest portion of TMB, TMB requires higher loan-loss provisions than TBank," said Mr Piti.

"TMB's rising special mention SME loans also requires the bank to set aside an additional reserve."

The combined provisions of both banks is higher than the Bank of Thailand's requirement in preparation for the Basel III regulatory framework, which will become effective from the beginning of 2020, and Thailand's Financial Reporting Standard version 9.

After the integration, the merged bank will be the country's sixth largest bank with total assets of nearly 2 trillion baht. The new entity's credit rating rate will subsequently be upgraded, helping the bank to raised funds with lower financial cost.

Mr Piti said the merged bank plans to raise funds more from the bond market, and the new bank's loan-to-deposit ratio would gradually increase from around 90% now to more than than 100%.

On average, the cost of deposit for TMB is 1.36% and TBank is 1.74%.

Initially, the financial cost of the merged bank is expected to be 1.5%.

The digital banking platform will also be a key area of growth for the merged bank in terms of promoting higher productivity and lowering costs.

This platform should improve profitability, he said.


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