Can Thai banks compete on an international front?

Bangkok Bank, Thailand's biggest lender, may sell its stake in ACL Bank to Industrial & Commercial Bank of China, the world's largest bank by market value, by the end of this year.

“The talks have been ongoing for a while to a point that it boils down to ICBC,” Kulathida Sivayathorn, a Bangkok Bank executive vice president said.

“We hope to wrap up the deal by the end of the year.” ICBC became the only suitor for Bangkok Bank's stake in Thailand's ACL after Malaysia's CIMB Group Sdn. said yesterday it has been dropped from the deal. Bangkok Bank is selling a 19.3 percent stake in ACL.

In recent months, foreign financial services companies including Bank of Nova Scotia, General Electric Co. and TPG Newbridge bought stakes in Thai lenders to tap growing demand for loans in Southeast Asia's second-biggest economy.

Kulathida said Bangkok Bank and ICBC will have to resolve regulatory issues before the sale can be completed.

Most Thai banks plagued by a relatively high gross non performing loan of more than 9% are looking at injections of foreign capital and expertise to turn their business around. Though undaunted by the military uncertainty in 2006, it may no longer be able to rely on the government full guarantee on deposits and may be forced to reorganize. Is the restructuring merely overdue? Will Thai banks be able to compete with the international players once the strict regulations on foreign ownership are lifted?