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Web-only Exclusives November 30, 2000 From Our Correspondent: Hirohito and the War A conversation with biographer Herbert Bix From Our Correspondent: A Rough Road Ahead Bad news for the Philippines - and some others From Our Correspondent: Making Enemies Indonesia needs friends. So why is it picking fights? |
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Bank Fire Sale
As prices go lower, foreign institutions are buying into Asia By ASSIF SHAMEEN September 13, 1999 Web posted at 8:30 p.m. Hong Kong time, 8:30 a.m. EDT
The Nakornthon deal comes after several others have failed. Hong Kong and London-listed giant HSBC recently pulled out of talks to acquire Korea's Seoulbank; U.S. investment firm Newbridge has twice failed in bidding for Korea First Bank. The sale of several other Korean, Thai and Indonesian banks have been on-again/off-again for months as foreign buyers were repulsed by the size of their bad loans. In other cases, the foreigners have been scared off by government bank restructuring agencies, which insist that buyers pay huge premiums for the troubled banks - and be responsible for their entire current loan book. Now the sellers are realizing they can't ask for too much money because foreign banks just won't pay. But the Nakornthon deal might just mark a turning point. Asian central banks, restructuring agencies and others now realize that time is running out. They need to clean up their banking systems or else they won't have healthy enough, competitive enough banks to sustain the emerging Asian economic recovery. Just over two months ago, Standard Chartered walked away from Nakornthon after months of due diligence. The London-based bank saw that Nakornthon's bad loans were still climbing - they were over 60% of total loans in June - and believed that Thailand's Financial Institutions' Development Fund (FIDF) was simply asking too much for the troubled institution. Then, FIDF effectively nationalized Nakornthon and recapitalized the bank on its own. The latest deal is a bargain for Stanchart, as Standard Chartered is known in Asia. Not just compared to what Stanchart would have paid two months ago but also compared to the experience of two previous buyers, ABN Amro of the Netherlands which purchased the Bank of Asia, and Singapore's DBS Bank, which made a deal for Thai Danu Bank. Stanchart is paying U.S.$ 314 million for 75% of Nakornthon, which will be renamed Standard Chartered Nakornthon Bank. Had Stanchart rushed into buying Nakornthon late last year, when it first start negotiating, it probably would have paid far more and spent couple of hundred million in additional recapitalization expenses. Nakornthon, one of the fastest growing banks in Thailand over the past five years, has 67 branches and U.S.$ 1.6 billion in assets. To a foreign bank like Stanchart its main attractiveness is that it is small. Since more than 70% of the branches are in greater Bangkok region, with very limited exposure in the provinces and rural areas, Stanchart will not have to close many outlets. Though it is based in London, Stanchart is as Asian as it gets. Its CEO is Rana Talwar, an Indian national who until two years ago headed Citibank's Asian retail banking operations from Singapore and is widely acknowledged as the man behind's Citi's successful Asian consumer banking strategy. Standard Chartered biggest shareholder is Malaysian-born, Singapore-based hotelier Khoo Teck Puat, who owns 15% of Stanchart stock. Other Asian investors and institutions control over 25% of the bank's shares. But back to Bangkok. The Thai bank fire sale is far from over. Next week a 75% stake in Radanasin Bank goes under the hammer. Radanasin, whose non-performing loans were reportedly 80% of its total loans in July, is now being recapitalized by the government. There were two main bidders - Citibank and Singapore's United Overseas Bank (UOB). Analysts say Citi has already walked away and only UOB is left. Reportedly UOB is negotiating to pay just over U.S.$300 million for the cleaned up, pared down Radanasin, versus an earlier U.S.$900 million figure. That would leave two major foreign players in Asia - Citibank and HSBC - without a substantial retail network in Thailand. The two can afford to wait. Two more Thai banks, Bangkok Metropolitan Bank and Siam City Bank, will be on the block next. All this activity, plus the need for good banks to promote the recovery, will put more pressure on Korea's Financial Supervisory Commission or FSC to sell the troubled Korean banks. One thing is certain : the asking prices will be far lower than what HSBC and Newbridge were negotiating to pay just a few weeks ago.
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INTELLIGENCE
TIME ASIA
