Siam Commercial Bank could earn as much as US$1b in SCB Life sale

That is equivalent to 60% of FY17 net profit.

Bloomberg reported AIA and Manulife are among bidders for SCB’s insurance subsidiary SCB Life and bidders are expected to be shortlisted this month.

SCB’s 49% divestment of SCB Life could fetch a reported USD3b, leaving it with a THB35b (US$1b) after-tax profit (60% FY17 net profit). Its operating outlook is also brighter than peers.

Here's more from Maybank Kim Eng:

The USD3b price tag looks a bit expensive as it implies 4x P/BV. However, insurance acquisitions in the past were also on average bought at this level. Furthermore, the deal may be interesting for AIA Thailand in particular as AIA Thailand is losing market share to non-listed Muang Thai Life Assurance (MTL), KBANK’s insurance subsidiary.

Acquiring SCB Life would give AIA access to SCB’s 1,170 branches nationwide. Thailand’s insurance market also has further room to grow, as seen from the low premium/GDP (3.7% in 2015 vs. 4.6%/8.8% of advance economies/ advance Asia, respectively). In sum, a USD3b deal is possible in our view.

SCB said the bank won’t entertain selling the entire insurance subsidiary, and is only looking for a partner. As the bank records SCB Life on a costbasis, which is very low (THB12b for the whole firm), divesting a 49% stake at the reported price would result in an approximate THB35b aftertax net profit, which is equivalent to 60% of FY17 net profit. Part of these extra gains could go to building up the coverage ratio.