T

he consolidation of the country'€™s banking industry has begun to take shape, with some small and mid-sized banks currently in merger talks.

Among the plans that are now being prepared are mergers between private lenders MNC Bank and Bank Pundi as well as between Bank Ekonomi Raharja and the Indonesia branch of the Hongkong and Shanghai Banking Corporation or HSBC.

Nelson Tampubolon, the Financial Services Authority (OJK) commissioner on banking supervision, said that the financial regulator had been informed of the two merger plans.

'€œWe have not received any official proposal regarding the MNC Bank and Bank Pundi consolidation, but informal talks between us and them have taken place,'€ he said on Monday.

Information about the MNC Bank-Pundi merger was previously published on the Indonesia Stock Exchange (IDX) website by MNC Kapital Indonesia, the owner of a 39.9 percent stake in MNC Bank.

MNC Kapital '€” part of the MNC Group that is owned by tycoon Hary Tanoesoedibjo '€” said in a statement that it was still finalizing the merger plan. According to the statement, MNC Kapital had placed Rp 100 billion (US$7.73 million) in capital reserves in Pundi on March 31 as part of its merger commitment.

Pundi also published a similar statement on the IDX, saying that the merger process was still taking place. At present, Pundi is 67.8 percent controlled by Recapital Securities, part of the Recapital Group.

The group itself was founded by businessmen Rosan P. Roeslani, Sandiaga Uno and Elvin Ramli.

According to the latest financial statements, MNC Bank'€™s assets amounted to Rp 9.43 trillion by the end of December and those of Pundi reached Rp 9.04 trillion.

MNC Bank is currently listed as a BUKU II lender with core capital of between Rp 1 trillion and Rp 5 trillion, while Pundi is included in the BUKU I category with core capital of less than Rp 1 trillion.

According to Nelson, the OJK has long urged such a consolidation to create a more competitive and efficient banking industry.

As reported before, there are now 118 commercial banks operating in Indonesia, managing total assets of around Rp 5.62 quadrillion.

Banking data reveals that a large chunk of the assets is controlled by the top 20 banks only, resulting in heavy competition for funds among medium-sized and small banks and high operational costs.

Banking authorities have called on small and mid-sized banks to engage in mergers among themselves in order to be able to survive in the tight banking market.

However, despite the regulator'€™s call, consolidation has been slow, with only one or two mergers or acquisitions taking place every year during the past 10 years.

Meanwhile, Bank Ekonomi is currently on its way to delist its shares from the IDX as part of the merger process with HSBC. As of now, HSBC Asia Pacific Holdings (UK) Limited holds majority ownership of Ekonomi with a 98.9 percent stake, followed by private lender Bank Central Asia (BCA) with 1 percent and the public with the remaining 0.1 percent.

'€œThe proposal says that Bank Ekonomi will become the surviving entity after the merger because of its status as a locally incorporated bank. It does not state anything about the new entity'€™s name, but I assume that it will still reflect HSBC'€™s identity,'€ Nelson said.

Separately, HSBC Indonesia managing director Ali Setiawan confirmed that the new entity planned to list its shares on the stock exchange after the consolidation was completed.