Scotiabank Said to Review $1.75 Billion Holding in Thai Bank

  • Scotiabank starts gauging interest in 49% stake in Thanachart
  • Review may result in partial or complete exit from investment

Bank of Nova Scotia, Canada’s third-largest lender by assets, is gauging interest in its stake in Thanachart Bank Pcl eight years after first investing in the Thai lender, people with knowledge of the matter said.

The Toronto-based lender’s review of its 49 percent holding could result in a partial or complete exit of the investment, the people said, asking not to be identified as the process is private. The Thanachart Bank stake has a carrying value of C$2.4 billion ($1.75 billion) on Scotiabank’s balance sheet, according to its latest annual report.

Scotiabank, Canada’s most international bank with operations in 55 countries, has been prioritizing expansion in Latin America over Asia, where it is hampered by ownership restrictions. Moody’s Investors Service last month put the lender’s rating on review for a downgrade, citing its series of acquisitions in “higher-growth but less stable international markets.”

“For an international bank considering Thailand, they would have to look at Thanachart Bank because of its large network,” Weerapat Wonkurai, a Bangkok-based analyst at CIMB Securities Thailand Co., said by phone Thursday. “Management vision and strategy at the bank is needed to create more franchise value.”

A formal sale process could start early next year if Scotiabank decides to proceed with a divestment, according to two of the people. The lender hasn’t made a final decision, and any deal would be subject to government approvals, the people said.

Asian Footprint

Mitsubishi UFJ Financial Group Inc. acquired control of Bank of Ayudhya Pcl for $5.5 billion in 2013, valuing the target at about 2 times book value, according to data compiled by Bloomberg. Banks trading in Thailand are valued at a median 1.1 times book value, the data show.

“As a matter of policy, we don’t add to market rumor and speculation,” said Diane Flanagan, a spokeswoman for Scotiabank. “If there was a process or interest in our stake in the market, there would be a complex, comprehensive process involving regulators, market participants and others.”

Shares of Thanachart Bank’s controlling shareholder, Thanachart Capital Pcl, have gained 6.3 percent this year, bucking the 12.5 percent slump in the country’s benchmark index. The lender has more than 600 branches across Thailand, according to its website.

Scotiabank bought a 25 percent of Thanachart Bank in 2007 for C$240 million. It spent C$270 million two years later to boost its stake to 49 percent, the regulatory limit for a foreign bank in the Southeast Asian nation.

The lender’s other Asian operations are in Japan, Korea, India, Vietnam and China, where it holds a minority stake in Bank of Xi’an. It sought to expand in China with a 2011 bid to buy 20 percent of Bank of Guangzhou, but dropped the deal in July 2013 after political changes affected negotiations.

Scotiabank fell two cents to C$57.19 at 9:54 a.m. in Toronto. The stock has declined 14 percent this year, compared with the 6.2 percent slide of the eight-company Standard & Poor’s/TSX Commercial Banks Index.

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