LOCAL BANK: Hong Kong Shanghai Banking Corporation Ltd (HSBC) Indonesia chief executive officer Rakesh Bhatia (center) talks with HSBC Indonesia chief operating officer Endy Abdurrahman (left) and HSBC Indonesia head of branch expansion Gary Jones after a press conference on the bank's plan to acquire Bank Ekonomi, in Jakarta on Monday. (JP/J. Adiguna)

London-based Hongkong and Shanghai Banking Corporation Limited (HSBC) will buy a majority stake in publicly listed Bank Ekonomi which is controlled by the Katuari family.

HSBC is slated to unload some US$607.5 million to acquire the stake, in a bid to double the size of its banking network in Indonesia.

HSBC Indonesia CEO Rakesh Bhatia said on Tuesday the bank had entered into an agreement to acquire an 88.89 percent stake in Bank Ekonomi for Rp 2,452 (some 25 US cents) per share.

Rakesh said, "We expect the acquisition will be completed within a few months," adding that the acquired shares would be paid for in cash using HSBC's internal resources.

The acquisition will be HSBC's first in Indonesia, increasing its network to more than 190 outlets in 24 cities.

"This acquisition increases our presence in Indonesia, putting us in the top three foreign banks in the country," said Sandy Flockhart, HSBC Holdings plc executive director and chief executive officer of HSBC Asia Pacific.

Rakesh said HSBC would benefit from Bank Ekonomi's strength in small medium enterprise (SME) banking.

"SMEs are the area we want to focus on, both globally and especially in Indonesia which has a growing number of SMEs. Bank Ekonomi will allow us to do that."

Rakesh said Ekonomi's strong SME banking and retail lending franchise "will complement HSBC's global expertise in all business lines".

He claimed that among foreign banks, HSBC was probably the largest bank in terms of its focus on SMEs.

HSBC will also focus on its conventional business, including credit cards and corporate banking.

"We will focus on all segments which we are already good at," he said.

Under the terms of the deal, HSBC will acquire a 38.84 percent stake from PT Lumbung Artakencana, 38.60 percent from PT Alas Pusaka, and 11.45 percent from individual shareholders.

Under Indonesian law, HSBC is required to make a Mandatory Tender Offer (MTO) for a further 10.11 percent of Bank Ekonomi.

Bank Ekonomi went public in October last year with the Katuaris remaining in control of the bank. Lumbung and Alas, both controlled by the Katuari family, are the majority owners of Bank Ekonomi.

The Katuari family, according to Forbes magazine, was the nation's 10th richest last year. With assets worth some $1.39 billion, the Katuari family's flagship is the Wings Corporation, Indonesia's largest maker of soaps, snacks, household products, and other consumer goods.

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