Japan bank's record bid for Bank of Ayudhya may whet appetite for other Thai banks

REUTERS - A US$5.6 billion bid by Japan's Mitsubishi UFJ Financial Group(MUFG) for a majority stake in Thailand's Bank of Ayudhya may pave the way for more foreign acquisitions of Thai banks as regulatory restrictions ease.

Thailand's central bank wants to boost the competitiveness of its banking sector to attract more foreign investment into Southeast Asia's second-largest economy. For foreign lenders keen to tap the region's booming economies, gaining control is key to make their investments worthwhile.

MUFG's deal to buy up to 75 per cent of the mid-sized Ayudhya appears likely to win Thai regulatory approval, burnishing the appeal of a US$1.1 billion stake in TMB Bank that Dutch financial services company ING Groep is seeking to sell.

Potential buyers for ING's 31 per cent stake in TMB have previously shied away from pursuing the deal because they were unsure about gaining control, financial sources said.

"The outlook of Thai banks is interesting given their strong performance," said Adisorn Muangparnchon, an analyst at Phillip Securities. Major Thai banks posted record net profit in the latest January-March quarter due to strong loan growth of about 13 per cent from a year earlier.

"For foreign banks, buying a stake in existing banks will be a quicker way for them to enter the Thai market, rather than applying a licence from the central bank," he added.

Under the current regulations, foreign banks can buy up to 25 per cent of a Thai bank without central bank approval but that changes if the stake rises to up to 49 per cent. More than that requires the approval of the finance ministry.

MUFG's acquisition of Ayudhya is expected to renew the interest of Malaysia's two dominant banks - CIMB Group Holdings Bhd and Malayan Banking Bhd - Japan's Sumitomo Mitsui Financial Group and Australian lenders in the TMB auction, banking sources said.

MUFG's acquisition of Ayudhya would be the biggest acquisition by a Japanese bank in the region.