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‘Bank Jago effect’: Small banks’ shares surge on consolidation, digital bank boost
Small banks have made it to the top gainers list on local bourse amid mergers and acquisitions by big banks and start-ups in their pursuit to establish digital banks.
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The Indonesia Stock Exchange (IDX) in Jakarta on Tuesday (26/5/2020). (Antara/M Risyal Hidayat)
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ublicly listed small banks’ share prices have been surging in recent weeks, a trend that analysts say is likely to continue over the year, as big companies eye stakes in such lenders to meet regulatory and market demands.
Lenders Bank Jago (ARTO), Bank Harda Internasional (BBHI) and Bank Neo Commerce (BBYB) are among the many “mini banks” that have been among the bourse’s top 10 gainers since the start of the year following news of their respective acquisitions. Such banks have core capitals below Rp 5 trillion (US$350.87 million).
Praus Capital research head Alfred Nainggolan said the price surge was a result of the Financial Services Authority’s (OJK) push for banking industry consolidation, the pandemic-induced acceleration of bank digitalization and the small banks’ low valuations.
“The trend is likely to continue,” he told The Jakarta Post in a phone interview on Tuesday.
OJK regulation No.12/2020 requires all banks in Indonesia to have at least Rp 2 trillion in capital by Dec. 31 and at least Rp 3 trillion by the end of 2022 to improve capital availability in the industry.
“This means that banks with capitals lower than Rp 3 trillion will seek to meet the regulatory requirement. When the owners of [small banks] cannot do this themselves, they are forced to consolidate, find new investors, thus creating an option for a merger or acquisition,” added Alfred.
The rally was led by Bank Jago – formerly Bank Artos Indonesia – whose share price began rising in December 2020 when tech unicorn GoJek acquired 22 percent of the lender, even though the bank booked a net loss as of the first half of that year. Jago’s shares had risen 162 percent year-to-date (ytd) as of Thursday.
