Shareholders of Bank CIMB Niaga and LippoBank on Friday officially approved a merger of the companies and management's proposal that top banker Arwin Rashid become president director of the resulting company.

The merger, which will become effective on Oct. 1, will see Niaga and Lippo join under the name CIMB Niaga, a joint media statement said. Their businesses are expected to be fully integrated in the fourth quarter of 2008.

"The shareholders approval will bring us to be the fifth largest bank by assets in Indonesia," Dato' Sri Nazir Razak, CIMB's group chief executive, said in a press release Friday.

As of May, Niaga had Rp 56.14 trillion (US$6.14 billion) in assets, according to the central bank.

Niaga, the sixth largest bank by assets, was ranked below Bank Danamon Indonesia, with Rp 93.04 trillion in assets.

Lippo had Rp 39.73 trillion in assets as of March.

CIMB Niaga will employ all of Niaga and Lippo's combined 10,560 employees, meaning there will be no layoffs, as has been promised by Dato Azman Mokhtar, managing director of Khazanah Nasional Berhad.

The merger, first unveiled on June 2, means the two banks will comply with the central bank's policy banning any institution or individual from owning a majority stake in more than one bank.

Khazanah has a 93.6 percent stake in Lippo and a 20.2 percent stake in CIMB, which controls a 63.4 percent stake in Niaga.

CIMB is Malaysia's second largest financial services provider, listed on Bursa Malaysia through Bumiputra-Commerce Holdings Berhad (BHCB) with a market capitalization of about US$10 billion.

CIMB is set to buy Niaga and Lippo shares at Rp 1,052 and Rp 2,969 each, respectively, from minority shareholders who opt not to take equity in the merged bank.

Arwin has held various positions in the banking industry, including vice president of Bank Negara Indonesia (BNI), president director of Bank Danamon Indonesia and vice president director of Niaga.

He is also a former president director and CEO of PT Telkom, the country's largest telecom company.

ndonesia's 10 Largest Banks by Assets

(As of May)

Bank Mandiri Rp 274.97 trillion

Bank Central Asia Rp 219.72 trillion

Bank Rakyat Indonesia Rp 205.19 trillion

Bank Negara Indonesia Rp 165.27 trillion

Bank Danamon Indonesia Rp 93.04 trillion

Bank Niaga Rp 56.14 trillion

Pan Indonesia Bank Rp 52.46 trillion

Bank Internasional Indonesia Rp 51.02 trillion

Citibank Rp 43.82 trillion

Bank Permata Rp 40.81 trillion

Source: Bank Indonesia

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