TMB Bank and Thanachart Bank will sign a merger agreement this month, sealing a deal to create the sixth-largest bank in Thailand, with assets of almost 2 trillion baht.
All due diligence reports are scheduled to seek approval from both banks' boards within this month, before the merger contract is signed, said a source at the Finance Ministry who requested anonymity.
If the processes stay on schedule, the shareholders' meetings of both banks will take place next month, the source said, adding that the capital increase to facilitate the consolidation will top the meetings' agenda.
According to the major shareholder structure of both banks, the Finance Ministry holds a 25.9% stake in TMB and Dutch bank ING has a 25% stake. SET-listed Thanachart Capital holds a 51% stake in TBank, while Canada's Scotiabank owns the remainder.
In February, TMB entered into a non-binding memorandum of understanding to consolidate with TBank through an entire business transfer with an estimated transaction value of 130-140 billion baht.
TMB plans to finance the transaction via a combination of debt and equity financing. Equity financing is expected to account for 70% of the transaction value.
TMB is the country's seventh-largest bank, with assets of 900 billion baht, while TBank is sixth, with assets worth 1.06 trillion baht at the end of June.
The source said the consolidated bank is expected to start operations by December.
The number of branches and employees necessary, particularly those in overlapping areas, will be considered after the merger is completed.
The consolidated bank plans to initially refrain from recruiting new staff and instead reshuffle redundant employees to replace retired staff, the source said, noting that both banks' retirement rate averages 30% a year.
The Finance Ministry said recently that it would inject fresh funds worth 10-13 billion baht to subscribe to newly issued shares and maintain shareholding at 25.9%. Dividends paid by the Vayupak Fund will be used for the newly issued share subscription.
TBank is the country's biggest auto hire-purchase lender, while TMB has a strong focus on transactional banking.
The resulting bank should have a combined market share of 10-11% for total assets and total deposits, approaching the size of Thailand's fifth-largest bank, Bank of Ayudhya, based on information from Fitch Ratings.
