Talks To Raise DBS Stake In Thai Bank Fail: Report

Source : The Straits Times, Thu, Sep 06, 2007

TALKS for DBS Bank to buy new shares of troubled Thai lender TMB Bank have reportedly failed.

TMB has instead opened negotiations to sell a stake to Dutch financial services giant ING Group as part of its efforts to raise capital, Reuters reported yesterday, citing unnamed TMB executives.

TMB, which incurred a loss of 12.3 billion baht (S$568.3 million) last year after setting aside more provisions to cover possible bad loans, wants to raise 35 billion baht by selling new shares to existing shareholders.

The bank is seeking to increase its capital adequacy ratio - a measure of its own capital in proportion to its outstanding loans - and clear its bad debts ahead of stricter Bank of Thailand rules next year.

In recent months, DBS had been negotiating with TMB to raise its 16.1 per cent stake, but it recently expressed disappointment over TMB's performance, as it had to book a S$159 million impairment in the value of its stake in TMB.

The Singapore bank has reportedly sought an overhaul of TMB's management, a higher level of equity participation and more control over the way the Thai lender is being run.

This has delayed TMB's recapitalisation plan, which was expected to have been completed in June.

Late last month, Thai newspaper Khao Hun reported that TMB had allowed ING to start due diligence on its financial position, as the Dutch group had agreed to buy a stake of 24.9 per cent.

If this deal goes through, DBS' stake in TMB will be diluted, and it will be replaced by ING as the Thai lender's second-largest shareholder.

The Thai Ministry of Finance is TMB's largest shareholder with a 31 per cent share.

Reuters yesterday quoted an unnamed TMB executive as saying that if DBS does not exercise its right to subscribe to the TMB issue, 'the bank will allocate new shares instead to ING, which can take as much as 25 per cent'.

TMB chairman Somchainuk Engtrakul also told Reuters that he expected the bank to finish its capital-raising exercise in December.

'What I can confirm is that the bank will complete the fund-raising with a new cash injection ready in December certainly,' he said.

A DBS spokesman declined to comment in response to queries from The Straits Times.

TMB was formed in September 2004 by the merger of Thai Military Bank, DBS Thai Danu Bank and Industrial Finance Corp of Thailand.