TAIWAN-BASED CTBC Bank, which will become the strategic partner of LH Financial Group, will send a management team to oversee trade finance and wealth management, according to the group’s chairman and executive director, Rutt Phanijphand.
CTBC Bank last month signed a memorandum of understanding with LH Financial Group, holding company of LH Bank, to buy 7.5 billion of the group’s new ordinary shares through a private placement at Bt2.20 per share. CTBC Bank will undertake due diligence and the transaction is expected to be completed by the end of the third quarter of this year. Apart from sending directors to sit on the Thai bank’s board, CTBC Bank will synergise with LH Bank in three areas. The first is by setting up a top-tier wealth-management business.
Second, CTBC aims to serve Taiwanese clients as a core segment and establish mid-cap business with cross-border propositions.
The third area is corporate transaction banking and retail digital banking.
CTBC Bank has 106 outlets in 14 countries, which has taught it that local people can provide the know-how for running a business in their domestic markets.
The Thai management team will not be affected by the arrival of CTBC Bank, and LH Bank wants the expertise of the Taiwanese partner to strengthen it in such areas as trade finance, Rutt said.
“Small banks cannot do trade finance, as even offering letters of credit overseas is beyond their capability. CTBC Bank has outlets overseas, while Taiwanese companies in Thailand are in the import-export sector.
Therefore, LH Bank can service letters of credit and lending to Taiwanese companies,” he said.
CTBC Bank has had a representative office in Thailand for 20 years and now wants to have a full presence here to serve Taiwanese companies operating in the Kingdom, of which there are around 3,000.
These companies, which are small and medium-sized enterprises in electronics, beverages and auto parts, have been using the services of local banks.
CTBC Bank has exposure in many countries in Asean and recently opened a representative office in Myanmar with the ambition to upgrade to a branch soon.
Rutt said CTBC Bank wanted to focus on doing business domestically, but after it injects Bt16.6 billion into the partnership, LH Bank might talk with it about working together in Asean countries.
LH Bank president Sasitorn Phongsathorn said the bank expected to spend five years accelerating business growth, especially in syndicated loans with major banks to support project finance for corporate customers.
LH Financial Group will receive Bt16.6 billion from the sale of new shares to the Taiwanese bank, bringing LH Bank’s Tier 1 capital adequacy ratio to 21.3 per cent, up from 10.2 per cent now.
CTBC Bank will hold 35.6 per cent in Land and Houses Financial Group, the same shareholding proportion as the existing major shareholders Land and Houses (LH) and Quality Houses (QH). After the transaction, the combined holding of LH and QH will be diluted to 35.6 per cent, of which 21.9 per cent is held by LH and 13.7 per cent by QH.
At present, their combined in LH Financial Group is 55.3 per cent, of which 34 per cent is held by LH and 21.3 per cent by QH.
Rutt said LH and QH had told the bank that they would maintain this proportion and neither planned to sell any of its stake for at least three years. Meanwhile, the new strategic partner prefers a 35.6-per-cent stake as well.