Indonesia to Weigh Approval for Bank Stakes Exceeding 40%

Darmin Nasution
Darmin Nasution. Photographer: Dimas Ardian/Bloomberg

Indonesia’s central bank said it will consider letting banks own more than 40 percent of local lenders under new rules that may allow DBS Group Holdings Ltd. to proceed with its $7 billion PT Bank Danamon Indonesia bid.

Banks that want to own more than the threshold set by July 13 regulations may seek approval if they are publicly traded and meet capital requirements, according to a statement posted on Bank Indonesia’s website. Foreign banks would need recommendations from their local regulator.

Shares of DBS, Southeast Asia’s largest lender, gained to the highest in almost a year. On April 2, the bank offered to buy a 67 percent stake in Danamon from Temasek Holdings Pte as well as equity held by minority shareholders. Concern that Indonesia, Southeast Asia’s biggest economy, may tighten ownership limits had led some traders to bet that the transaction could unravel.

“The new rules will pave the way for DBS to buy Danamon,” said Tjandra Lienandjaja, an analyst at PT BNP Paribas Securities Indonesia. “There are exemptions” to the 40 percent limit, “which we view as positive.”

DBS, which is 29.5 percent owned by Singapore’s state-owned investment company Temasek, said it will pay its biggest stockholder 45.2 trillion rupiah ($4.9 billion) in new shares for the Danamon stake. DBS plans to buy the remaining stock for 21.2 trillion rupiah in the region’s largest banking takeover.

Shares Rally

Shares of DBS climbed 1.5 percent to S$14.55 at the close in Singapore, the highest since Aug. 4. Danamon gained 1.6 percent to 6,300 rupiah at the close in Jakarta, the highest since April 26.

DBS will review the new rules and will “continue to work closely” with Bank Indonesia, said Karen Ngui, a spokeswoman for the lender.

An owner exceeding the 40 percent limit must have a Tier 1 capital ratio of at least 6 percent and be committed to owning the bank for a “certain period of time,” according to the regulations signed by Bank Indonesia Governor Darmin Nasution on July 13. Within five years from an acquisition, at least 20 percent of the target bank’s shares must be publicly traded.

Corporate Governance

The ruling “seems to apply only to new acquisitions” because existing banks will be exempt if they meet the Indonesian central bank’s minimum corporate governance and financial health requirements, Keith Wee, a Kuala Lumpur-based analyst at OSK Research Sdn., said in a note to clients.

Oversea-Chinese Banking Corp. owns 85.06 percent of PT Bank OCBC NISP, according to an e-mail from the Singapore-based lender. It said the latest guidelines are “positive.”

“We believe that we will be able to meet the corporate governance and financial health requirements for majority owners,” OCBC said.

Malayan Banking Bhd. has a 95 percent stake in PT Bank Internasional Indonesia, according to the Malaysian lender’s website. Maybank said in an e-mailed statement that Bank Internasional will uphold its standards, “allowing it to maintain its current shareholding structure.”

Qatar National Bank SAQ holds 69.59 percent of PT Bank Kesawan, and Standard Chartered Plc owns 45 percent of PT Bank Permata, data compiled by Bloomberg show.

“Under the new regulation, Standard Chartered may maintain its 44.5 percent stake at PermataBank provided Bank Indonesia considers PermataBank to have good corporate governance,” the U.K. bank said in an e-mailed statement.

Non-financial companies may own as much as 30 percent of Indonesian lenders and individuals may hold 20 percent, according to the regulations.

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