Bank Of Asia Sold To Singapore Bank

UOB unveils Thailand bank merger

United Overseas Bank, Singapore's largest bank in terms of market value, yesterday said it had bought Thailand's Bank of Asia from ABN Amro, the Dutch financial group.

The US$553.5m all-cash deal underscores the recent regional expansion undertaken by the city-state's banks, the biggest and financially the strongest in south-east Asia.

UOB already has a 79 per cent stake in UOB Radanasin Bank, Thailand's smallest bank, but the acquisition of a 80.8 per cent stake in BOA would make it the ninth-biggest banking group in the country, with a 3.5 per cent share of the local market, after they complete an intended merger.

Singapore's three banks are taking advantage of banking reforms in neighbouring countries to conduct a wave of cross-border takeovers to expand beyond the city's limited market. ABN Amro's decision to sell BOA is linked to moves by the Thai government to consolidate the country's crowded banking sector, with the goal of reducing the number of banks from 13 to three or four.

UOB paid Bt5.35 per share for BOA, a 9.6 per cent premium to the bank's closing share price on Tuesday, and represents a price to book value multiple of 1.87 times. Last month, UOB was conducting due diligence for the purchase of a 23 per cent stake in Indonesia's Bank Buana. It also has operations in the Philippines and Malaysia and wants foreign operations to account for 40 per cent of revenues by 2010.

"This is a big deal for us. We are taking things one step at a time," said Wee Cho Yaw, UOB chairman, about plans for further expansion in Thailand.

UOB wants to use BOA to promote "organic" growth in Thailand, with a focus on lending to small businesses and consumer finance.

UOB's rivals - OCBC and DBS - have said they are also studying plans to expand regionally while earnings for Singapore banks are rising.

UOB said that its purchase of BOA would boost its earnings by 2.1 Singapore cents a share.

Singapore banks are among the world's strongest, with capital adequacy ratios close to 20 per cent, twice as much as most other global banks.

Standard & Poor's, the international credit ratings agency, said it would raise its rating on BOA to BB+ from BB, reflecting "expected support" from UOB.

Fitch Ratings recently said that the overseas expansion of Singapore banks would "result in a slightly higher risk profile". However, the improvement of management abilities at the banks and strong capitalisation would allow them to handle such risks and their credit ratings were likely to remain stable.

Recent investments in regional banks by Temasek Holdings, Singapore's state investment agency, has helped spur the city-state's commercial banks to follow suit. Temasek bought two Indonesian banks that were sold by the government after they were nationalised during the 1997/98 Asian financial crisis.

--FT.com 2004-05-13