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Thai bank buys local MFI in mammoth deal

A security guard directs customers to parking at a Hattha Kaksekar Limited branch in central Phnom Penh yesterday afternoon.
A security guard directs customers to parking at a Hattha Kaksekar Limited branch in central Phnom Penh yesterday afternoon. Pha Lina

Thai bank buys local MFI in mammoth deal

In what may be the biggest deal in Cambodia’s financial sector history, Thailand-based Bank of Ayudhya has reached an agreement to acquire the local microfinance institution (MFI) Hattha Kaksekar, with the deal expected to be valued at upwards of $140 million.

In a statement released yesterday, the Thai bank, commonly referred to as Krungsri, confirmed the agreement to buy Cambodia’s fourth-largest microfinance institution, paving the way for its entry into the Kingdom’s crowded and highly competitive micro-lending sector.

Hout Ieng Tong, president and CEO of Hattha Kaksekar (HKL), said negotiations were still under way for the final sale figure, but that it would exceed $140 million, making it the biggest-ever buyout in the sector.

“We needed to execute our expansion plans and were looking for a new partner to do this,” Ieng Tong said, adding that the MFI was approached by the Thai bank.

Krungsri’s takeover of HKL, which hinges on approval from the National Bank of Cambodia (NBC) and could take six months to complete, will not result in any structural changes, Ieng Tong said.

He said the management and staff were expected to remain intact, and the new partner would help accelerate the firm’s expansion plans.

“The plan is actually to recruit more staff because we have to expand a lot this year,” he said. “Our original plan was to add six more branches, but with this new partner we may get the chance to expand more than six.”

HKL’s customers would benefit from the new partner’s entry, he said, given that Krungsri – Thailand’s fifth-largest bank by assets – would share its superior technological capacity, which would improve the quality of service as well as make it more convenient for customers.

HKL is the latest Cambodian microfinance institution to attract an international partner. South Korea-based Woori Bank purchased local MFI Malis Finance for $4.9 million in 2014. Sathapana MFI announced a merger with its majority stakeholder, Maruhan Japan Bank, and is expected to transform into a commercial bank this year.

Cambodia has around 47 MFIs with a wide network of branches across the country and more than 19,000 employees. While the sector had combined loan portfolio of $2.02 billion in 2014, HKL alone accounted for $364 million in loans and $238 million in deposits in 2015.

Krungsri president and CEO Noriaki Goto said his bank would leverage its technical know-how to take advantage of HKL’s established position in the market, and look at the MFI’s potential to expand in the Cambodia, Laos, Myanmar and Vietnam (CLMV) region.

“The share acquisition in HKL will enable the bank to capture growth opportunities arising from the rapid development in the CLMV countries,” he said.

The statement noted that the deal would now be subject to shareholder approval, as well as a regulatory nod from the Bank of Thailand and other relevant authorities. It did not name the sellers; however HKL’s 2014 annual report lists the MFI’s main shareholders as Oikocredit, ANMF (Triple Jump) and Norfund, each with about a 20 per cent shareholding.

Bun Mony, president of the Cambodia Microfinance Association and CEO of Sathapana, said the deal should be welcome news to the sector, as it signals increased competition that will benefit customers.

“Basically, the purpose of a deal like this is to extend more services and we believe that the new shareholder will be good for the sector,” he said.

Calling the acquisition possibly the biggest in the sector, Mony added that in light of the recent ASEAN integration there could be similar deals in the offering.

“We could see more banks come here if Cambodia is open for them,” he said. “But so far, the NBC seems to be strict with newcomers because they want to see good progress with existing banks’ performance.”

HKL currently has a partnership with ANZ Royal Bank, allowing the MFI’s customers to access ANZ accounts through HKL’s network of branches.

Grant Knuckey, CEO of ANZ Royal, said the bank was aware of HKL’s lookout for equity tie-ups and expected a deal to crystallise.

“They are a very well-run institution, so we were quite sure this would eventuate,” he said.

Additional reporting by Sor Chandara

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