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DatabankFebruary 14 2019

Thai incentives aim to spur bank consolidation

In April 2018, the government of Thailand approved tax incentives for banking mergers in hopes of stimulating consolidation. Thailand’s banking sector is fragmented compared with similar-sized economies in the region, but is looking to catch up. Kat Van Hoof reports.
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Two of Thailand’s top eight banks by assets are set to join forces this month: TMB Bank and Thanachart Bank (TBank). Finance minister Apisak Tantivorawong has long been an advocate of consolidation in order to create ‘champion banks’ better equipped to compete with larger foreign lenders and bigger banks in the region. Banker data shows that the two banks would have combined total assets of $56.7bn based on 2017 figures.

Under the new regime, which will lapse in 2022, merged banks can deduct corporate income tax and expenditures, depending on their size. The bigger the merged entity, the bigger the incentive, with banks more than Bt4000bn ($128bn) of assets deducting the most. This leaves great scope for Thailand’s top five banks, which range between $81.5m and $94.1bn in size, to breach the upper bracket in case of a merger.

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