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ublicly listed lender Bank Tabungan Pensiunan Nasional (BTPN) is seeking better financial capabilities amid a merger plan with the Indonesian branch of Japanese lender Sumitomo Mitsui Banking Corporation (SMBC), which controls 40 percent of its shares.

SMBC currently owns 98.4 percent of shares of its Indonesian branch, Bank Sumitomo Mitsui Indonesia.

BPTN president director Jerry Ng said both lenders were currently assessing their valuations and preparing a timeline for the corporate action.

However, the boards of directors in both banks had yet to set the date for the merger as it was still subject to the Financial Services Authority’s (OJK) approval, he said.

“We are happy to say that many government authorities, such as Bank Indonesia [BI], the OJK and the Deposit Insurance Corporation [LPS] have welcomed the decision,” he said in a press briefing on Wednesday.

He said the merger supposedly would not conflict with each other’s businesses given SMBC’s specialization in corporate banking, while BTPN had expertise in the retail sector.

“We hope that the whole [merger] process can be concluded by the end of this year,” he said.

SMBC’s parent, Sumitomo Mitsui Financial Group (SMFG), had earlier this year expressed its intention to expand its operation in Asia’s emerging markets, including Indonesia.

In an interview with Reuters last month, SMFG CEO Takeshi Kunibe said the company was keen on raising its stakes in BTPN. In 2013 and 2014, the bank spent a total of 150 billion yen (US$1.39 billion) to purchase 40 percent of BTPN’s shares.

SMFG and rival banks in Japan face persistently low interest rates at home and stricter capital rules globally, pressuring them to seek growth drivers, according to Reuters.

Jerry of BTPN said the merger plan would put the bank in a much higher position in the domestic banking industry as it would have more capital to support its business expansion.

As of September 2017, BTPN is categorized as a medium-scale lender with Rp 93.7 trillion in assets and a BUKU III bank, which has a minimum core capital of Rp 5 trillion. Meanwhile, SMBC Indonesia’s assets are valued at Rp 68.5 trillion.

“If this plan can be executed, the bank will become stronger and have much more capital. We will also be getting closer to becoming a BUKU IV bank,” Jerry said, referring to the BUKU IV bank category, which has a minimum core capital of Rp 30 trillion.

BTPN needs a boost in capital now more than ever, as the bank has to cope with a 30 percent decrease to Rp 1.2 trillion in annual net profit in 2017 due to what it claims is one-off spending for its consolidation and investments for its digital banking platform.

BTPN finance director Arief Harris said the bank had disbursed Rp 736 billion for a restructuring program and Rp 832 billion to develop its digital banking services, such as a platform called Wow!, which targets lower-income groups, and another dubbed Jenius, which targets middle-class consumers.

The restructuring took place as the bank was now shifting more toward digital, which led to closures of physical branches and voluntary terminations of more than 4,000 employees, Arief said.

“So, our net profit had actually gone up by 6 percent in 2017 at Rp 2.4 trillion, but only about Rp 1.2 trillion is left because of all the investments,” Arief said at the same event.

The bank’s loan grew by 3 percent year-on-year to Rp 65.3 trillion in 2017, while the gross nonperforming loan (NPL) ratio stood at 0.9 percent.

Its third-party funds also grew by 3 percent to Rp 67.9 trillion in 2017 from Rp 66.2 trillion seen a year earlier.