DBRS says that there are no rating implications in the Bank of Nova Scotia’s agreement to acquire 24.99% of Thanachart Bank.
Thanachart Bank is the eighth-largest bank in Thailand with $9.1 billion in assets, representing slightly more than 3% market share, 142 branches, and 260 ATMs, DBRS says, adding that Thanachart Bank is the leader in auto lending with 24% market share in the new car segment.
The rating agency says that the transaction is consistent with BNS’s strategy of growing its international operations. “The bank intends to use this investment as a catalyst for future growth as Thailand offers attractive growth opportunities given the low penetration rate of banking,” it says.
DBRS says it views BNS’s international operations as a key component of the bank’s growth strategy. “While not without risk, this risk is managed through diversification among many different countries,” it adds.
BNS is investing approximately $240 million (for 24.99%) of Thanachart Bank. BNS will sell its branch assets in Thailand to Thanachart Bank. The transaction is expected to be modestly accretive to earnings in year one and have no impact on BNS’s Tier 1 capital ratio, which will remain among the strongest of its Canadian bank peers, DBRS explains.
The agreement also contains a provision for BNS to increase its ownership stake up to 49%, for an equivalent price, should legislation allow, subject to a one-year extension and further call rights for a four-year period. The deal is subject to completion of definitive documents and regulatory approvals, and is expected to close by June 30.
No rating implications in Scotiabank’s Thanachart Bank acquisition
Rating agency DBRS sees BNS’s international operations as a key component of the bank’s growth strategy
- By: James Langton
- March 29, 2007 March 29, 2007
- 15:33