Dutch financial group ING will buy a 25.2 percent stake in Thailand's TMB Bank, TMB officials said on Wednesday after the money-losing Thai bank rejected a last-minute rival bid.

The TMB board has picked ING after it made the best offer, a bank official told Reuters after the TMB board spurned a joint counter offer from Singapore's DBS Group and Germany's Deutsche Bank.

ING will have a 25.2 percent stake in TMB after the share acquisition, said the official, who declined to be named.

ING had raised its original offer of 1.40 baht each for new shares in TMB, he said, declining to give the final price of the share sale, which is part of a $1 billion recapitalisation plan for Thailand's sixth-biggest lender.

DBS and Deutsche had offered 1.60 baht her share, or $618 million, for a bigger stake in TMB, a move that would have increased the DBS stake in the ailing lender to at least 25.2 percent from 16.1 percent, a banking source said.

The offer by DBS was an abrupt change of heart by Southeast Asia's biggest bank by assets.

News of the renewed interest came almost two months after it refused to take part in the recapitalisation plan, saying the Thai bank was not giving it sufficient management control to improve its performance.

It also signalled the last move by outgoing DBS chief executive Jackson Tai, who has tried desperately to expand the bank's presence beyond its two key revenue centres, Singapore and Hong Kong.

It is an important regional banking opportunity and DBS is reluctant to leave Thailand, said Matthew Wilson, a banking analyst with Morgan Stanley.

DBS STOCK DROPS

DBS shares fell 2.3 percent, underperforming the broader market, as investors weighed its bid to raise its stake in TMB, which reported a huge 20.7 billion baht net loss in the first nine months of this year, compared with a net profit of 4.6 billion baht a year earlier.

Canada's Bank of Nova Scotia (Scotiabank), U.S.-based private equity fund TPG Newbridge and General Electric have all bought stakes in Thailand's banking sector, which showed improved loan growth and earnings in the third quarter despite political uncertainty after last year's coup.

But other analysts were sceptical about how effective DBS would be even as a strategic investor, since TMB has been struggling despite signs of improving loan demand ahead of national elections in December.

TMB could not get better instantly after recapitalisation. It needs time to clean up things as the bank has a load of problems, not just lack of money -- about efficiency of its staff and technology to improve, Finansa Securities head of research Ratchanok Dandamrongrak said.

The stock has fallen about 35 percent this year, underperforming a 21 percent rise in the banking sector and a 31 percent rise on the Thai index.

DBS, in which Singapore state investment firm Temasek Holdings [TEM.UL] has a 28 percent stake, reconsidered its stance on TMB after the two sides resumed talks, a third banking source said.

The investment in TMB had become increasingly painful for DBS since it wrote down the value of its stake by S$38 million

($26 million) in the third quarter -- the second quarter it booked an impairment for TMB -- and said it may cut the value further. The Thai bank had announced plans in October to sell the 25 billion new shares at 1.40 baht to raise 35 billion baht ($1.11 billion), which included selling 10.97 billion shares to a new investor and 2.14 billion shares to the investor's partners.

After that, the investor would hold a 25.2 percent stake in TMB and its partners 4.92 percent through non-voting depositary receipts (NVDRs), an investment vehicle to allow foreign investors unlimited holdings in Thai stock.

TMB, 31.2 percent owned by the Thai Finance Ministry, would also offer 5.59 billion shares to the ministry. If accepted, the exercise would reduce its stake to 26.2 percent.

The Thai bank is forecast to make a net loss of 3.81 billion baht this year, but four analysts polled by Reuters Estimates see it making a 5.18 billion baht profit in 2008 on stronger loan growth and after two years in which it was forced to record high provisions for bad loans.

(Additional reporting by Trisanat Kongkhunthian and Manunphattr Dhanananphorn, editing by Darren Schuettler/Richard Hubbard)

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