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Danamon Drops Most in 4 Years as DBS Deal Lapses: Jakarta Mover

Danamon Drops Most in 4 Years as DBS Deal Lapses
A customer uses a PT Bank Danamon Indonesia automated teller machine (ATM) at a branch in Jakarta. Photographer: Dimas Ardian/Bloomberg

Aug. 1 (Bloomberg) -- PT Bank Danamon Indonesia shares plunged the most in more than four years after DBS Group Holdings Ltd. ended a $6.5 billion bid to control the lender.

Danamon fell 13 percent to 4,500 rupiah at 11:18 a.m. in Jakarta, heading for the steepest drop since January 2009. It was the biggest decliner in the Jakarta Composite Index, which dropped 0.3 percent after data today showed that inflation accelerated more than forecast in July. Danamon has fallen 20 percent this year, compared with a 6.5 percent gain in the benchmark gauge.

Singapore-based DBS ended what would have been Southeast Asia’s largest banking takeover after failing to win regulatory approval for a majority stake. The deal’s failure is a setback to DBS Chief Executive Officer Piyush Gupta’s ambitions to expand in faster-growing countries and reduce reliance on Singapore, Southeast Asia’s least-profitable loan market.

“Some people were still hoping that the deal would go through,” Syaiful Adrian, analyst at PT Ciptadana Securities, said by phone from Jakarta today. “Now that DBS has really let the deal fall through, people dumped the shares.”

Danamon, the country’s sixth-largest bank by assets, was traded at 1.5 times price-to-book ratio, the lowest since April 2009, compared with 2.4 times for the Jakarta Finance Index.

The Indonesian lender is over-reliant on automotive financing, a business that has been hurt by the central bank’s decision last year to introduce a requirement for higher downpayments, Adrian said. The bank also has higher costs of funds than its competitors, he said.

To contact the reporter on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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