Bank Mandiri Says Indonesia More Attractive Than Singapore

Budi Gunadi Sadikin, the head of Indonesia’s largest bank, said his home market is more attractive than Singapore less than a month after Indonesian efforts to get access to the city state scuttled what would have been Southeast Asia’s biggest banking takeover.

“It is more important for the Singaporean banks to get into Indonesia” rather than the other way round, said Sadikin, president director of PT Bank Mandiri, referring to his country’s under-penetrated banking sector and Singapore’s smaller economy and population. “Singapore to us is a small opportunity,” he said in an interview last week.

Indonesia’s central bank has been seeking reciprocity in Singapore for the nation’s biggest banks, including Mandiri, the largest by assets. At the same time, Indonesia last year imposed foreign ownership limits that prompted Singapore’s DBS Group Holdings Ltd. to drop its 66.4 trillion rupiah ($6 billion) acquisition of PT Bank Danamon Indonesia.

If the Monetary Authority of Singapore showed a “positive gesture” in granting greater access to Indonesian banks, “then the transaction would have gone smoothly,” Sadikin said.

He said he would still be “very happy” for Jakarta-based Bank Mandiri to receive a full banking license in Singapore. “I won’t open 25 branches in one year. But at least I have the flexibility.”

Loan Profitability

The average net interest margin, a measure of lending profitability, for Singapore banks is 1.8 percent, the lowest in Southeast Asia, according to data compiled by Bloomberg from the latest company filings. Indonesian banks with a market value of at least $5 billion boast an average margin of 6.55 percent.

Indonesia’s economy may expand between 5.8 percent and 5.9 percent in 2013, Finance Minister Chatib Basri said on Aug. 23. The Singapore government estimates growth will range from 2.5 percent to 3.5 percent this year.

Still, Indonesia hasn’t been immune to capital flight from emerging markets on speculation that the U.S. will start tapering its bond-buying stimulus program. The Indonesian rupiah fell to the lowest level in more than four years against the dollar today.

Indonesia needs to address its current-account deficit and reduce inflation, Sadikin said. Southeast Asia’s largest economy posted a record current-account shortfall of $9.8 billion in the second quarter. The central bank raised benchmark interest rates in June and July to combat inflation at a four-year high.

“What we’re doing now is readjustment to the new realities, the new fundamentals of our economy,” Sadikin said in a separate Bloomberg Television interview with Haslinda Amin. “Yes, there will be a short period of shocks, up and down, but the fundamentals will prevail.”

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