THAILAND-BASED Bank of Ayudhya Public Co. Ltd. is set to acquire a 75% stake in consumer financing firm HC Consumer Finance Philippines, Inc. (HCCFP) as part of its expansion efforts in Southeast Asia.
“The proposal is in line with the Thailand-based bank’s strategy to increase its geographic diversification in regional markets that present growth opportunities,” S&P Global Ratings said in a bulletin on Tuesday.
S&P said the acquisition is also in line with Bank of Ayudhya’s strategy to “seek opportunities in the retail space, where it has some expertise.”
“We believe Bank of Ayudhya has built capital and provisioning buffers that will help it mitigate the risks associated with the proposed acquisitions,” it added.
The Thai bank plans to fund the acquisitions internally, according to the bulletin.
“The deal size is about ฿17 billion, about 6% of the bank’s total adjusted capital as of Dec. 31, 2021. The impact of the acquisition on the bank’s capital should be manageable,” it added.
As of Sept. 30, the bank’s capital adequacy ratio was 17.62% and its provision coverage ratio of 177.5% was higher than the Thai industry average.
The bank has also maintained a lower nonperforming loans (NPL) ratio of 2.38% versus the industry average of 2.77% as of end-September.
“We also expect the Bank of Ayudhya to align underwriting standards of these companies with its own practices,” S&P added.
Bank of Ayudhya also announced that it was acquiring a majority stake in Home Credit Indonesia PT (HCI).
“The Indonesian and Philippine markets present a good growth opportunity for BAY, given their large numbers of young people, who are often unbanked. This is in stark contrast to Thailand’s aging demographics and high household indebtedness,” S&P said.
“Interest margins in Indonesia and the Philippines are also significantly higher than in Thailand. However, BAY would have to contend with greater inherent volatility and risks associated with point-of-sale lending in emerging markets, as reflected in the high non performing loan ratios of HCI and HCCFP,” it added.
HCCFP offers loans for buying mobiles, electronics, appliances, and furniture, as well as payment processing, loan insurance, and financial advisory services. — Luisa Maria Jacinta C. Jocson