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Jakarta Post

BCA evaluates smaller banks, may acquire one

  • Grace D. Amianti

    The Jakarta Post

Jakarta   /   Mon, March 30, 2015   /  09:06 am

Private lender Bank Central Asia (BCA), the country'€™s third largest bank, is assessing several smaller banks and considering the possibility of acquiring one to help boost the group'€™s business.

This move differs from the strategies of other large banks that are most interested in expanding business in neighboring countries. But BCA president director Jahja Setiaatmadja said the lender had decided to focus on the local market through organic and non-organic growth.

'€œWe are interested in small banks, but we don'€™t have a target yet,'€ Jahja said after the launching of branchless banking program at the Financial Services Authority (OJK) headquarters.

BCA revealed its acquisition program in its 2015 business plan (RBB) submitted to the OJK. However, the lender has not followed it up with the financial regulator, Jahja added.

According to Jahja, BCA was currently conducting a thorough study on small banks, focusing on financial performance and future prospects. However, BCA has not opened discussions with any of the small banks.

So far, the most pressing issue is the acquisition price, which will potentially be too expensive. This will put BCA in a difficult situation, he said.

'€œAny non-organic decision may give either good or bad results, which can create a problem for the parent company in the future due to differences in business cultures between the parent company and the new subsidiary,'€ Jahja said.

Jahja did not offer details on which small banks BCA was considering, even though he expected the prospective ones would be those that did business in a way similar to BAC, such as having a significant portfolio of trade loans.

Based on an OJK regulation, Indonesian small lenders are formally categorized as BUKU I and BUKU II banks, while mid-size and large ones like BCA as BUKU III and BUKU IV.

BUKU I banks are those with core capital of under Rp 1 trillion (US$76.4 million), while BUKU II banks have between Rp 1 and 5 trillion and BUKU III banks have between Rp 5 and 30 trillion. BUKU IV lenders, on the other hand, have core capital exceeding Rp 30 trillion.

As the country'€™s largest private bank, BCA has followed the booming trend of the country'€™s financial conglomerations in recent years, which was marked by business expansion in various financial sectors to attract more customers.

According to the OJK, Indonesia currently has 31 financial conglomerates '€” 16 of which control around 60 percent of total domestic financial assets.

As of now, BCA Group has six subsidiaries: automotive financing firm BCA Finance, Hong Kong-based remittance office BCA Finance Limited, sharia lender Bank BCA Syariah, securities company BCA Sekuritas as well as general and life insurers BCA Insurance (formerly Central Sejahtera Insurance) and BCA Life.

Jahja said BCA had allocated a total of Rp 1.5 trillion in investments to its capital expenditure, even though most of the
money would be injected for existing subsidiaries. Recently, Jahja said the bank'€™s six subsidiaries would need Rp 1 to 1.1 trillion in additional capital.

'€œWe have a Rp 1.5 trillion budget, which includes capital injection for subsidiaries. So, I think we have a sufficient amount of money if we want to acquire small banks. We don'€™t have to spend so much,'€ Jahja added.

With the capital injection this year, Jahja said BCA was expecting more contributions from its subsidiaries. As of last year, BCA'€™s net profit grew 15.7 percent year-on-year to Rp 16.49 trillion, with around 8 to 9 percent coming from subsidiaries.

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