Speaking after a shareholders' meeting yesterday, Krit said that under the agreement with the US bank the parent company, GE Capital International Holdings Corporation, would to pay Bt22 billion for 1.39 billion BAY shares within 10 days of the meeting.

"I cannot confirm that the deal with GE will be completed now that the coup has taken place. I haven't talked to them yet because of the different time zones," said Krit. "We've finished our part. It's now up to GE to complete it."

Shareholders yesterday approved the sale of 1.39 billion shares to GE at Bt16 apiece. The shares account for 25.4 per cent of BAY's stock. Another 609 million shares are to be offered to GE within five years at a price dependent on the market.

BAY's board had originally planned in August to sell 2 billion shares to GE. The sale was rejected by the Finance Ministry after Finance Minister Thanong Bidaya said he was unsure if he had the authority to approve it.

If the deal goes ahead, BAY will become the country's largest bank. Aside from its existing assets, GE will transfer Bt2.94 billion in deposits and Bt1.83 billion in mortgage and personal loans portfolio to the bank.

That would increase BAY's capital adequacy ratio from 11.43-to-1 to 19.18-to-1 and raise its tier-one capital from 7 per cent to 14-15 per cent of its assets.

According to Bank of Thailand requirements, each bank must have a capital adequacy ratio of at least 8.5-to-1.

BAY predicts that it will have Bt47 billion in capital within five years of the merger being completed.

Kim Eng Securities (Thailand) has rated the bank's stock a "long-term buy" with a fair-value estimate of Bt22.50. It predicted that the sale of the shares would not take place until the end of next month.

Kim Eng Securites also said that BAY would benefit from the merger, under which it expects GE Money Retail Bank to introduce new products and services as well as improve BAY's corporate governance and risk management. However, the brokerage quoted BAY as saying that GE Capital International Holdings had no intention of making any substantial changes to the bank's policies or management structure in the next 12 months.

In addition to considerably strengthening the financial position of Thailand's fourth-largest bank, the capital increase will allow the bank to develop its "universal banking" platform. In the long run, this will generate more non-interest income for BAY and help it cope with forthcoming challenges such as stiffer industry competition and regulatory reforms.

Somruedi Banchongduang

The Nation