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ingapore'€™s DBS Group Holdings believes that its failure to acquire Bank Danamon will not hamper the company'€™s expansion in Indonesia'€™s banking industry.

Melvin Teo, president director of the business group'€™s local unit DBS Indonesia, said in Jakarta on Wednesday that it would still be able to post higher growth in the Indonesian lending market even without the takeover of Danamon.

'€œThe reality is, even without the Danamon acquisition, our organic strategy is sound,'€ Teo said in his first media interview after DBS walked away from its plan to acquire Danamon four months ago.

In its core business, the Singaporean lender has always had an organic growth strategy of expanding credit outreach, rather than pursuing inorganic growth through mergers and acquisitions, he said.

Teo said that DBS would focus on expanding its corporate lending and wealthy client services businesses that have become the company'€™s main strength in Indonesia.

In July, DBS called off its plan to acquire 99 percent of Danamon'€™s shares for Rp 66.4 trillion (at that time US$6.8 billion), after waiting for more than a year on deadlocked negotiations between the central banks of Singapore and Indonesia.

Bank Indonesia (BI) had only been willing to allow DBS to own up to a 40 percent stake in Danamon, conditional upon the Monetary Authority of Singapore agreeing to allow exceptions to entry rules for Indonesian state-run banks wanting to expand to the city-state.

Despite having upbeat views on his bank'€™s business prospects in Indonesia, Teo acknowledged it was difficult to expand credit outreach in the small and medium enterprises (SMEs) credit segment without having Danamon.

The plan to merge DBS and Danamon was initially expected to create a very strong force in Indonesia'€™s banking industry, given DBS has strong footing in the corporate lending segment and Danamon has a presence with SMEs.

'€œWe don'€™t have the network,'€ Teo said when asked on his strategy to boost his bank'€™s loans to SMEs, a lucrative lending sector that offers the biggest margins for banks.

'€œWe only have 35 branches in Indonesia, compared to thousands of branches belonging to Mandiri and BCA [Bank Central Asia],'€ added. '€œIn order to bank with all these very small companies, you need to have the branch network.'€

Despite BI'€™s recent bout of interest rate hikes, Teo projected DBS would post 18 percent lending growth in 2014, which is higher than this year. Third quarter figures showed that DBS'€™ total outstanding loans in Indonesia grew 15 percent to top Rp 34 trillion.

The 18 percent lending growth target was realistic, he said, because of increasing loan demand from expanding local companies and infrastructure projects.

This month, DBS surprised the market when it sold its 9.9 percent stake in Bank of the Philippine Islands (BAPI) for $681 million, in what was the bank'€™s biggest divestment to date.

However, Teo said Indonesia was different than the Philippines and DBS would '€œreinvest quite a lot of money'€ to develop its Indonesian franchise. For DBS, Indonesia is included in its top core markets alongside China, Taiwan and India, in addition to its central business in Singapore and Hong Kong.