Krit, deal with GE is well timed.

Among those owning large- and medium-sized banks in the Thai market, BAY's major shareholder, Krit Ratanarak, has always been perceived as one of the most conservative, having held the majority shareholding in the bank for a long time - even in the difficult years following the financial crisis of 1997.

Now, it has become clear that his decision to allow the US financial-service giant to step in was a smart move. Krit's shareholding will be reduced and GE Money will be another major shareholder in this mid-sized Thai bank, but BAY will have good prospects in the long term.

Stock analysts praised the deal as positive news for BAY, as GE Capital's financial know-how in retail banking operations will give it a competitive edge.

Kim Eng Securities (Thailand) said in a report that the deal would improve BAY's financial status and boost its competitive advantage by allowing it to tap into GE Capital's financial expertise. For GE Capital, the strategic partnership with BAY will help it expand its client base via the bank's nationwide branch network.

United Securities echoed this sentiment, saying BAY will receive a long-term positive boost from GE Capital's technological know-how.

The timing is also right for Krit to give up his majority stake. BAY's profitability and image in the retail banking sector have improved significantly over the past three years.

With GE Money on board, the move gives BAY a competitive edge that may even have the large-sized banks worried.

Banthoon Lamsam, CEO of Kasikornbank, once said that in terms of IT development and consumer financing know-how his bank had only 50 per cent of what he would accept as competitive by international standards.

For mid-and smaller-sized banks, BAY's deal may be a good example for them to follow if they want to be competitive in the long term.

Yesterday, BAY informed the Stock Exchange of Thailand that GE Capital Asia Pacific Ltd intended to take a 25-per-cent stake at Bt16 per share. On April 27, 2004, the bank had approved the allocation of new ordinary shares to investors by private placement.

"The board of directors resolved that the share price offered is acceptable, but the size of the private placement and shareholding will be subject to the consent of the Bank of Thailand," BAY president Pongpinit Tejagupta said in the statement to the bourse.

There is no doubt the BOT will approve the deal in order to support merger and acquisition activity in Thailand, as the central bank would like to see fewer but more efficient players in the finance industry.

Tarisa Wattanagase, deputy governor of the BOT, said the central bank would have to look into details of the deal, but the principle was to maintain its single-presence rule.

Seamico Securities yesterday said in a report that it expected GE Money to invest Bt16.44 billion in BAY, which will merge with GE Money after the 25-per-cent purchase is concluded.

"We expect GE Money will purchase 1.24 billion shares of BAY (25 per cent of total shares, including from full warrant exercise) worth Bt16.44 billion," Seamico said.

But the securities house believes BAY's current share price is too high, although the offering price of Bt16 is reasonable. However, the stock price has increased by more than 50 per cent since the end of last year, and therefore the upside to the fair value of Bt19.50 is now limited.

Seamico reiterated a "fully valued" rating on the stock, while Kim Eng recommended a "trading buy". Kim Eng said BAY still offered a potential upside of 14 per cent to the fair value estimate of Bt21 per share.

United Securities said it recommended investors to sell BAY stock for short-term profit and later buy back the shares for long-term investment when the price declines.

BAY's stock closed at Bt17.50 yesterday, down from Bt18.40 on Wednesday.

The long-term outlook for BAY looks bright.

Yesterday Fitch Ratings revised the outlook on BAY's long-term foreign currency issuer default rating from stable to positive and affirmed the rating at BB+.

Fitch also revised the outlook on BAY's national long-term rating from stable to positive and affirmed the rating at A(tha), its national short-term rating at F1(tha), and the national subordinated debt rating at A-(tha).

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