LH Bank, the banking arm of Thailand's biggest home builder, Land & Houses, said on August 19 it planned an initial public offering in the second half of 2009 and wanted to become a full-service bank.
The lender, founded in 2005, would raise at least 2.6 billion baht ($77 million) through the IPO and a stake sale to a foreign bank in a bid to enhance its competitiveness, President Sasitorn Phongsathorn told Reuters in an interview.
"To increase our capital enough to upgrade to become a universal bank, the way we are going is to have an IPO and seek a foreign partner," Sasitorn, 51, said. "We expect to offer a 15-20 stake in the IPO and a 20-25 percent stake to the partner."
"But the IPO is the priority. The partner could come after the IPO, or at the pre-IPO stage, depending on the price offered," the MBA graduate said, adding the IPO should be launched in the second half of next year.
The bank has mandated SCB Securities as financial adviser for the IPO. "What we need is a foreign bank that has no presence here, so that we will grow together. What we have is a strong data base, so we are looking for someone who knows how to utilise the data," Sasitorn said, referring to its parent firm's household data.
To become a full-service commercial bank under Bank of Thailand rules, a bank must have a capital base of at least 5 billion baht, compared with LH's 2.37 billion baht, Sasitorn said.
LH bank currently offers banking services to individuals and small and medium-sized firms. It cannot undertake riskier activities, such as operating foreign exchange and derivatives businesses.
The lender, which has 38.4 billion baht in assets and 29 billion baht in loans, is 43 percent owned by Land & Houses and 27 percent by another builder, Quality Houses. Members of the same family have interests in both builders. The bank had a book value of 9.50 baht per share and expected that to increase as it planned to wipe out a retained loss of about 200 million baht by the end of the year, Sasitorn said.
LH's housing loans account for 78 percent of total lending. Most of those loans go to customers of the parent's housing projects. The remaining 22 percent is lent to small firms.
The bank, which operates 17 branches and has 581 staff, aimed for loan growth of 40 percent to a net 35 billion baht at the end of this year, when its assets should rise to 45 billion baht. It aimed to boost assets to 100,000 billion in 2011. Outstanding housing loans in Thailand were valued at 776 billion baht at the end of June, representing 11 percent of total loans. Mortgage lending is dominated by Siam Commercial Bank.
Like other small banks, LH needs help in a competitive domestic market as the government encourages consolidation ahead of a planned liberalisation and increasing foreign competition, which some analysts say smaller banks might not survive.
At the midsession break Land & Houses shares were down 4.32 percent at 6.65 baht, while the overall Thai stock market was 1.12 percent lower.