Yesterday, TMBThanachart Bank Public Company Limited (SET: TTB) disclosed to the Stock Exchange of Thailand (SET) that the bank has entered into a memorandum of understanding (MOU) with Thanachart Capital (TCAP) to acquire Thanachart Securities (TNS) stakes from TCAP.
Currently, TNS is predominantly owned by TCAP at 90%, with the remaining 10% held by TTB. Following the completion of this deal, TNS will transition to be a subsidiary of TTB, although specific pricing details have yet to be disclosed.
CGS International Securities (Thailand) (CGSI) noted that during the first half of 2024, TNS reported total revenue amounting to THB536 million, with a net profit of THB95 million. However, its market share in the brokerage business has fluctuated, standing at 1.9% year-to-date and ranking 15th among 37 brokers. Notably, its market share for November 2024 decreased to 1.26%, positioning it at the 24th rank.
Both TTB and TCAP will undertake due diligence procedures before finalizing the transaction, which is expected to conclude by 2025. It is anticipated that this acquisition will enhance TTB’s fee income by 7.1% and boost net profit in 2025F by 0.9%. Given the marginal impact on TTB’s earnings, the news is unlikely to significantly impact market sentiment or TTB’s share price today.
Recommendation-wise, a Hold on TTB is advised from CGSI, maintaining a target price of THB2.04.
Additionally, TTB stated that it has decided to enter into this transaction as it sees that the acquisition of shares in TNS would help enhance its capabilities in the wealth ecosystem and competitiveness through TNS’ strengths. TNS is a leading securities company with longstanding presence in this business and strong financial position, which would build the customer’s trust and confidence in two key areas of financial services if it becomes a subsidiary of the Bank.
The first area is to offer investment service solutions for retail customers, especially the affluent retail customer segment, which has seen a significant increase after the merger. Combining TNS’ product suites with the Bank’s existing products would create a one-stop service platform and allow customers to gain a 360-degree view of their wealth portfolio management. The second area involves services for commercial customers. TNS would help enhance the Bank’s existing capital management services, such as investment banking, capital market services, and the offerings of other financial instruments.
The Bank believes that the acquisition would uplift customer experience, create work opportunities for employees by expanding new areas of work, and generate business growth for shareholders, benefitting all stakeholders. The Bank has therefore decided to enter into the MOU.
TTB stated that it intends to finance the transaction from internal funding sources, primarily from excess liquidity and capital which currently exceeds the minimum requirements set by the Bank of Thailand (the “BoT”) significantly. As of the third quarter of 2024, the Bank’s Capital Adequacy Ratio (CAR) is at 19.7%, and the Tier 1 Ratio is at 17.3%, compared to the BoT’s minimum requirements for D-SIBs which is 12.0% and 9.5%, respectively.
