The Bank of Thailand's new rule to cap investment by commercial banks in digital asset businesses at under 3% of their capital may affect Siam Commercial Bank's (SCB) 17.85-billion-baht investment deal in Bitkub Online as its value exceeds the limit.
Analysts from Asia Plus Securities (ASPS) said the new criteria put Bitkub at a disadvantage because it may drive SCB to either negotiate for a lower price or postpone the deal from the end of the month.
However, ASPS has an optimistic view of the central bank rule that allows banks to invest more in fintech firms, excluding digital asset businesses, as SCB has invested 7% of its capital in fintech. Kasikornbank (KBank) also recently diversified its investment into fintech and should benefit from this rule, said the brokerage.
The central bank may consider pushing or revoking the limit if it sees local digital asset businesses have met the corporate governance and market conduct standards, said ASPS.
In addition, the bank may require any financial institutions seeking to hold digital assets to set aside more capital reserves to reduce risk in the future.
ASPS said most commercial banks' investments in digital asset businesses are small, other than SCB's deal to acquire a 51% stake in Bitkub Online.
The deal is worth 17.85 billion baht, but 3% of SCB's capital would be about 12.6 billion, based on reporting of around 420 billion baht at the end of 2021.
The central bank has not officially announced the calculation method, but the new rule will likely affect the deal and investors should follow SCB's actions and whether it will apply for a waiver from the Bank of Thailand, negotiate a lower trading price or reduce its stake in Bitkub Online to comply with the new criteria, said the brokerage.
"The central bank's announcement is expected in the first half of this year. Therefore, this deal will likely be postponed until after the announcement," said ASPS.
The brokerage said it still recommends investors maintain a neutral weight in bank stocks such as KBank and Tisco Financial Group because both banks have higher returns on equity than the group's average.
SCB's share price dropped based on the news, but investors can accumulate it as part of a long-term strategy, said ASPS analysts.
According to Capital Nomura Securities (CNS) research, the brokerage believes SCB will retain its proposal to buy Bitkub, believing SCB can operate in accordance with the central bank's new criteria.
The brokerage said SCB can elevate Bitkub Online's standards in corporate governance, risk management, code of conduct and investor protection to meet the central bank's requirements as all commercial banks have experience adjusting their operations to meet these standards.
The central bank has clearly stated that a digital asset business that meet its standards may not be required to comply with the new criteria, said CNS.
The brokerage expects the value of the deal to drop below what SCB previously reported.
According to the Securities and Exchange Commission's report, digital asset trading turnover stood at 100 billion baht in February, down 60% from November 2021 when SCB announced the Bitkub deal.
Moreover, the number of active digital asset trading accounts in February dropped 29% to 495,000 accounts compared with November 2021, increasing SCB's bargaining power.