BANGKOK: In December Apisak Tantivorawong, the finance minister, said his ministry was considering a plan to make mergers more appealing by offering tax incentives to local lenders and assisting companies with the costs of amalgamation.
The minister said the proposed measures would be aimed at bolstering the sector and better preparing domestic operators for increased international competition, but he released no further details.
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“Our policy is not to force but to give incentives to motivate them into thinking… because Thailand does not have a bank that can be called a champion bank that can compete overseas,” Apisak said.
Indeed, while Thai companies are expanding their regional presence, offshore deals are still largely undertaken by banks outside ASEAN, with European, US or Japanese institutions responsible for financing the majority of mergers and acquisitions (M&A).
However, a factor that could further improve the competitiveness of local financial institutions in the region is the implementation of the ASEAN Banking Integration Framework (ABIF).
The ABIF, to be introduced in 2020, will grant qualified banks greater access and flexibility to operate in other ASEAN markets, opening up expansion opportunities and increasing investment flows.
Despite the government’s intentions, there are concerns the proposals may not have the desired effect of merging lenders at the top end of the domestic market.
Industry stakeholders have told OBG that the relative strength of Thailand’s major banks could prove to be a barrier to change, noting that medium-sized players are more likely to take part in M&A.
Furthermore, the overall healthy state of the industry could prevent banks from considering merging, as most operators are in a strong financial position with low levels of non-performing loans and solid compound annual growth rates.
