Asset Management giant, JMT Network Services Pcl. (JMT) and banking giant Kasikorn Bank Pcl. (KBANK) potentially engaged in a joint venture to establish a standalone unsecured asset management company, according to sources in the banking industry.
The deal structure is expected to be JMT holding 65-75% of stake and KABNK to hold remaining 25-35%. The venture would streamline KBANK to offload its unsecured non-performing loans (NPL) such as credit cards among others from its books.
Currently the deal is pending approval from the Bank of Thailand (BOT) which according to sources once approved would be able to operate immediately. This structure would pose as a pilot model with two other banking giants in Thailand expected to announce similar venture with JMT early next year.
Once the deal is cemented after regulatory approval, this would ensure sizable amount of NPL for JMT. The venture might get preferential access to high quality of NPLs from the bank given KBANK’s direct involvement in the JV. JMT might also be benefited potentially being able to secure funds from KBANK bearing low interest rates, thus booking higher profit margin for both JMT and the JV.
Strategically since KBANK would hold 65-75% of stake, impact on the bank’s balance sheet is expected to be relatively lower. The formulation of the alliance would allow KBANK to secure higher profit margin given the JV’s potential to book higher net margin. According to Finansia Securities’ research, “financial institutions generally offload their unsecured NPLs at 5-10% of claim value vs the net margin of JMT of 30%”.
JMART’s associate concern Singer is one of the pioneers of title loans for trucks in the market and synergies might potentially extend to KBANK increasing their exposure with both parties collaborating in this venue.