BANGKOK -- Thailand's oldest lender, Siam Commercial Bank, is ramping up its drive into fintech with the acquisition of a 51% controlling stake in local cryptocurrency exchange operator Bitkub Online for 17.85 billion baht ($535 million).
The deal estimates Bitkub's total valuation at 35 billion baht ($1.05 billion), making it the latest unicorn in a country once seen as barren in terms of startups. "Unicorn" describes a private company with a valuation of $1 billion or more.
The investment comes as conventional banks in Southeast Asia push to modernize to fight off growing competition from tech giants offering digital services such as consumer loans and e-payments.
"Digital asset exchange has rapidly gained popularity over the past few years and will grow even further in the long term," said Arthid Nanthawithaya, CEO and chairman of the bank. "The move is in line with SCB Group's strategy to upgrade to a financial technology group, meeting new consumer needs and entering a new competitive arena that will emerge very quickly in the next three to five years."
Investors welcomed the step, with shares in Siam Commercial Bank rising nearly 3.5% to 134.5 baht after the announcement. Bitkub coin, a cryptocurrency issued by the startup, surged 180% to $2.78 from $0.99, according to market tracker Coincost.
SCB's diverse portfolio includes food delivery app Robinhood. (Screenshot from Robinhood webpage) The bank, which still needs the go-ahead from the Bank of Thailand and the country's Securities and Exchange Commission, expects to complete the acquisition in the first quarter of 2022.
SCB is known for its unique shareholder structure. It was founded by Thailand's royal family in 1904, and King Maha Vajiralongkorn currently owns 793 million shares, or nearly a quarter of the bank.
Thailand's fourth-largest bank by assets already has a relatively diverse portfolio. Businesses under its umbrella include AI-driven fintech company SCB Abacus and food delivery app Robinhood.
And the bank is gearing up for a major reorganization, which it expects to be on the agenda at an extraordinary general meeting of shareholders set for Nov. 15. It plans to shift to a holding company so most of its subsidiaries can operate largely free of strict banking regulations.
Bitkub, formed in 2018, will be purchased through the bank's stock brokerage arm, SCB Securities.
"Bitkub has reached a milestone by becoming an important part of Thailand's digital economy infrastructure," said Bitkub Capital Group founder and CEO Jirayut Srupsrisopa. "Bitkub is no longer just a startup and is now becoming a necessary part of the infrastructure critical for Thailand's financial industry."
Bitkub ranked as the world's 81st-largest digital asset exchange as of Thursday, with a 24-hour turnover of $253 million, according to market tracker CoinMarketCap, which covers over 300 bourses.
Rapid growth in Bitkub's trading volumes sparked service outages in January, with Thailand's SEC reportedly ordering the exchange to improve its technical infrastructure.
Despite those setbacks, it reported a trading volume of 1.03 trillion baht to the SEC in the nine months ending September, representing a Thai market share of approximately 92%.
"Having brought Bitkub to a very important turning point, we needed to elevate Bitkub to the global level, so we turned to a strong partner like SCB to help us achieve our target faster and more sustainably," said Jirayut, with SCB's customer base a big draw.
The deal comes amid a tough business climate for Thai banks, with profits crimped as the nation's central bank kept its policy interest rate at a record low of 0.5% from May 2020 in the face of the COVID-19 pandemic.
SCB's consolidated net profit for the first nine months of 2021 came in at 27.7 billion baht. While that was up 25% from a coronavirus-induced dip in the same period the year before, it could still be tough to reach the kind of 40-billion-baht annual profit seen before the pandemic.
As well as diversifying digitally, some Thai banks have been turning overseas for new opportunities. Bangkok Bank, Thailand's largest lender by assets, acquired an 89% stake in Indonesia's Bank Permata for 33.6 trillion rupiah ($2.2 billion) in May 2020. Indonesia's main policy rate is currently at 3.5%.