JP Morgan puts 3 lenders in spotlight
JP Morgan has identified three potential targets for further consolidation in the increasingly competitive Thai banking industry: Siam City Bank (SCIB), Kiatnakin Bank (KK) and Tisco Bank.
"SCIB, KK and Tisco look cheap, with SCIB and KK trading below their book value," the global broker said in a research note yesterday."KK is trading at 0.8 times of PBV [price to book value] and 7.6 times of PE [price to earnings]. SCIB is at 0.9 times of PBV and 8.5 times of PE. Tisco is a bit more expensive compared with the two but still cheaper than the industry average," it said. Merger and acquisition (M&A) activity in the domestic financial industry has been heating up following recent deals between Bank of Ayudhya and GE; BankThai, TPG and Newbridge; and Thanachart Bank and Scotiabank. The transactions were made at very good prices. GE paid 1.4 times PBV for a 25-per-cent stake in Bank of Ayudhya, and Scotiabank will pay 1.6 times PBV for almost 25 per cent of Thanachart Bank. "M&A activities so far have confirmed the Thai financial market remains attractive to foreign investors. Although we remain relatively cautious on fundamentals of small banks, we see M&A as a catalyst, especially since transactions already completed have occurred at significant premiums," JP Morgan said. It also said it did not expect Scotiabank to add value to Thanachart Bank in terms of increased product variety and banking technology but that there would be minimal improvement in funding costs.
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