Talks of a potential merger between TMB Bank and Thanachart Bank (TBank), including the possibility that the Finance Ministry will inject fresh funds to maintain its shareholding in TMB, are expected to be concluded by the end of January.
If the deal goes through, the Finance Ministry's shareholding in TMB is likely to be diluted and it will need to pump fresh funding into the bank to retain its stake, Prapas Kong-Ied, director-general of the State Enterprise Policy Office (Sepo), told the Bangkok Post.
A proposal for the Finance Ministry to inject fresh capital in TMB is among crucial topics in the merger talks, he said. The ministry is considering whether the proposal and pricing of the capital increase in shares are acceptable.
"The finance minister doesn't mind if the ministry's stake is reduced following the recapitalisation, nor does he care what share price the ministry must pay," Mr Prapas said. "Whether the share value will increase after the merger is the most important issue."
Finance Minister Apisak Tantivorawong said recently that TMB had received multiple merger and acquisition (M&A) offers from financial institutions such as TBank and Krungthai Bank, but all the offers were in the initial stages of negotiations and none has reached a conclusion yet.
TMB would reportedly recapitalise to facilitate the merger deal with TBank, with Dutch bank ING owning more than 20% but not exceeding 25%, while TBank and the Finance Ministry would hold 20% and less than 20%, respectively.
The Finance Ministry is the largest shareholder in TMB, with a 25.9% stake, while ING has a 25% stake. In TBank, Thanachart Capital holds a 51% stake and Canada's Scotiabank owns the rest.
SET-listed TMB is the country's seventh-largest bank with assets of 873 billion baht, while TBank is in sixth with assets worth 1 trillion baht at the end of September, according to Stock Exchange of Thailand data.
TMB has been a topic of M&A speculation for months since the cabinet in April approved a royal decree on tax deductions and exemptions to encourage mergers among Thai banks and create large "champion" banks that are able to compete with foreign banks.
Mr Prapas said the merger talks between both banks' executives are close to being concluded.
Both banks must finalise the merger and decide which subsidiaries will be consolidated, before submitting the plan to Sepo and the Fiscal Policy Office, which will then bring it to the Finance Minister for approval.
Mr Prapas said the Finance Ministry cannot approve TBank's request for a tax exemption when integrating the bank's subsidiary into the consolidated entity, as the royal decree on tax deductions and exemptions offers the tax waiver only for financial institutions that merge.
A banking source confirmed that both banks are in the early stages of merger talks.
