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Asian lenders bank on Indonesia for growth
Asian banks in search of business opportunities are turning to Indonesia, with financial institutions from Japan, Korea and Singapore hoping to acquire domestic banks as the local authority finalizes a plan to relax foreign ownership in local banks
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span>Asian banks in search of business opportunities are turning to Indonesia, with financial institutions from Japan, Korea and Singapore hoping to acquire domestic banks as the local authority finalizes a plan to relax foreign ownership in local banks.
Two Japanese lending giants earlier this year led takeovers of domestic banks.
Japan’s third-largest lender by assets, Sumitomo Mitsui Banking Corporation (SMBC), owns a 96.89 percent stake in private lender Bank Tabungan Pensiunan Negara (BTPN). SMBC bought BTPN’s shares for Rp 14.28 trillion (US$1.01 billion) under a tender scheme. It then merged BTPN with the group’s Indonesian subsidiary, Bank Sumitomo Mitsui Indonesia, in February.
One of the world’s biggest lenders and the largest by assets in Japan, Mitsubishi UFJ Financial Group (MUFG), also rocked the banking industry with this year’s biggest transaction on the stock market, acquiring Bank Danamon Indonesia for Rp 52.58 trillion. MUFG now owns 94.1 percent of Bank Danamon after merging the bank with its Bank Nusantara Parahyangan.
The mergers by the two Japanese banks were mandatory as the Financial Services Authority’s (OJK) single presence policy allows majority shareholders of local banks to own only one banking entity. However, the OJK is currently planning to relax the bank ownership regulation to enable more acquisitions in the local banking industry.
“The relaxation will act as a sweetener for bigger banks to consolidate with smaller banks,” said OJK banking supervisory division head Heru Kristiyana, declining to elaborate, including on the timeline of the policy revision.
The increasing interest by Asian banks in Indonesia was a result of low interest rates in many countries on the continent, said Federation of Private Domestic Banks (Perbanas) chairman Kartika “Tiko” Wirjoatmodjo before he was sworn in as deputy state-owned enterprises minister.
“Japan even has negative interest rates, giving it a low cost of funds,” Tiko told the press in Jakarta. “This gives them excess funds, so that’s why they are actively seeking acquisitions to boost growth.”
MUFG Group’s head of financial solutions, Makoto Kobayashi, said on Oct. 13 that the Japanese bank also planned to increase its stake in Danamon.
“We are certainly interested in increasing our investment in Danamon in the future because we see Indonesia’s domestic consumption rate has remained high during the trade war,” he said.
Mergers and acquisitions among banks are expected to continue in the future as recent McKinsey and Company research revealed that banks around the world, including in Indonesia, were looking at acquisitions to fuel growth, senior partner Joydeep Sengupta told The Jakarta Post.
“As banks are in need of large capital investment for technology while others continue to seek inorganic growth opportunities, I certainly think the market will see more consolidation in the future,” Sengupta said.
Japan’s Mizuho Financial Group and Sumitomo Mitsui Financial Group, along with Singapore’s DBS Group Holding Ltd. and Oversea-Chinese Banking Corp. (OCBC) are rumored to be interested in buying stakes in Bank Permata, according to Bloomberg.
However, South Korean banks seemed to have been interested in Indonesian banks way before their Japanese and Singaporean peers.
Woori Bank, for example, acquired 33 percent of Bank Saudara in 2012 and formed Bank Woori Saudara. Shinhan Bank also entered the Indonesian banking market in 2016 following its acquisition of Bank Metro Express and Centratama Nasional Bank, which it merged to form Bank Shinhan Indonesia.
OJK spokesperson Sekar Putih Djarot said the authority welcomed foreign banks in Indonesia as long as they contributed to the country’s economy by supporting national economic development. (bry)
