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umitomo Mitsui Banking Corporation (SMBC) recently acquired 24.3 percent of PT Bank Tabungan Pensiunan National (BTPN) as part of its plan to control up to 40 percent of the bank.

SMBC managing director head of growing markets Yasuyuki Kawasaki explained the company'€™s program after the acquisition in Jakarta last week to The Jakarta Post'€™s Raras Cahyafitri. Also present were managing director head of Asia Pacific division Masayuki Shimura, director and deputy head emerging markets business division Chow Ying Hoong and BTPN president director Jerry Ng. Below are excerpts from the interview.

Question: SMBC finally agreed to buy some of BTPN'€™s shares from TPG Nusantara. How was the negotiation process with TPG?

Answer: It'€™s a long history. SMBC has researched various countries, from Indonesia and China, to various African countries, knowing that those are growing markets and we may find an opportunity there. After a long period of investigation, we came to the conclusion that Indonesia is one of the most important countries for SMBC'€™s
expansion.

Everybody knew that TPG owned substantial amount of BTPN and that TPG was obliged to comply with a lock up period until last March 14. [TPG and its Indonesian affiliate North Star agreed to a five year lock up when they acquired the stake in 2008].

I have to say that the discussion with TPG has been comprehensive and intensive since the lock up expired.

When will SMBC increase ownership to 40 percent?

Everything will be decided by the proper process through the appropriate regulatory framework. We will make every effort to proceed in a proper manner and to comply with the regulatory regime here in Indonesia. We want to make this happen as soon as possible.

Any plan to invest in other banks?

Now, we have interests in two different entities, BTPN and our Indonesian subsidiary [PT Bank Sumitomo Mitsui Indonesia]. We are focused now on enhancing the platform and businesses, on the growth and expansion of those operations.

Do you have any plan to merge the two banks?

The answer is no. Our existing subsidiary is in the wholesale banking business, which provides big loan syndication for large projects like Paiton and the Wampu power plant. BTPN'€™s serves the mass market. Those are totally different business models. We see complementary aspect to the two entities. We'€™d rather keep them independent.  

What are the advantages to SMBC and BTPN from the acquisition?

We are going to use an equity method in our accounting system. Profit of BTPN will be automatically recognized in our financial statement based on the percentage of our investment.

We also can learn from BTPN how to do business here in Indonesia in mass market in particular, where we haven'€™t much experience. What looking at just now, is the funding and liability capacity, which are areas we may be able to add some value.

Jerry: In the last five years, we have been happy to have TPG as a committed shareholder. Now we have two parents. Given SMBC'€™s US$1.3 trillion in balance sheet, with BTPN only around $4 billion, the capacity will give BTPN the power to grow.

We can also learn from SMBC'€™s international experience, transfer of technology, etc., which will improve BTPN'€™s business.

BTPN is currently the 16th largest bank by assets in Indonesia. Since the arrival of SMBC, do you have
a new plan to further expand?

Jerry: We have never specifically mentioned how big we will be. All I can say is that we want to be healthy. If we can become one of the 12 big banks by asset that is good, 10 biggest, also good.

There is a growing number of Japanese companies investing in Indonesia. Has SCMB been following the trend?

Kawasaki: We have done quite lengthy research on a range of countries. Indonesia has a very attractive profile, with a big population of 240 million people, plenty natural resources, dedicated people, big market consumption and so on. There are plenty reasons why Japanese corporation love to do business in Indonesia.

It could be said we are following the trend or that SCMB is expanding in Indonesia to meet demand from Japanese customers. Our intention is not only growth of our business, rather we are talking about mass market business to serve a broader range of customers.

On the corporate banking side, a hit and run strategy can work. Retail banking business is quite different from corporate banking. In that context, SMBC has taken another step in terms of strategy; we want to be part of the growth of the Indonesian economy.

Do you see any big challenges in Indonesian banking practices?

If I talk about our current Indonesian subsidiary, we don'€™t see too many challenges or difficulties. The speed of growth speed of Indonesia'€™s businesses is tremendous and needs to be monitored. More businesses means more people and more transactions.

Talking about the mass market, that'€™s a totally different story. There is a unique aspect to banking sector here and as a foreign bank SMBC doesn'€™t have the experience nor expertise to do business in that environment. That'€™s why need very good partner.

The mass market is getting more competitive, that'€™s what we understand. BTPN has established itself in a unique position in the market to differentiate itself from other competitors.