Sumitomo Mitsui to Buy $1.5B Stake in Indonesia’s BTPN

Sumitomo Mitsui Financial Group Inc. agreed to buy 40 percent of Indonesia’s PT Bank Tabungan Pensiunan Nasional for about $1.5 billion, the Japanese lender’s biggest purchase of a foreign financial firm.

Sumitomo Mitsui Banking Corp., the lending unit of Japan’s second-biggest bank by market value, is buying 24.3 percent of BTPN at 6,500 rupiah a share from investors including TPG Capital and plans to increase the stake to 40 percent, the Tokyo-based company said in a statement yesterday. The shares are being sold at a premium of 14 percent on yesterday’s close.

Japan’s three biggest banks, including Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., are accelerating overseas takeovers as deflation discourages borrowing at home. Indonesia is the most lucrative market for loans among the world’s 20 biggest economies, while Japan is the least profitable in Asia, data compiled by Bloomberg show.

“Southeast Asian countries are a must for Japanese banks’ overseas expansion,” said Toyoki Sameshima, a Tokyo-based analyst at BNP Paribas SA. “We have started to sense the possibility that Japanese banks can become global lenders.”

The Japanese bank is buying the 24.3 percent stake from May 8 to May 10 for 9.2 trillion rupiah ($946 million), it said in the statement. It plans to purchase an additional 15.7 percent from TPG later, subject to regulatory approval. The 40 percent stake will cost about 150 billion yen ($1.5 billion), said Sohei Nishimaki, a Tokyo-based spokesman at Sumitomo Mitsui.

Shares Fall

Shares of Sumitomo Mitsui fell 0.8 percent to 4,640 yen at 11:30 a.m. in Tokyo. BTPN slid 1.7 percent to 5,700 rupiah at yesterday’s close in Jakarta, giving it a market value of 33.3 trillion rupiah.

Investing in BTPN will give Sumitomo Mitsui President Koichi Miyata, 59, greater access to Southeast Asia’s most populous nation and fastest-growing economy. The Indonesian bank, originally a lender to retired civil servants, has rallied more than 10-fold since began trading on March 14, 2008.

“BTPN has a unique business model and offers a wide range of services focusing on the mass market,” Sumitomo Mitsui said in the statement. Indonesia “is expected to record rapid and sustainable growth driven by its large population” and expanding middle class, it added.

Banks such as DBS Group Holdings Ltd. are looking to expand in Indonesia as its households gain spending power. The country’s central bank has said it plans to rule this month on Singapore-based DBS’s proposed $6.8 billion takeover of PT Bank Danamon Indonesia.

Fastest Growth

Gross domestic product in Indonesia will expand 6.3 percent this year, the fastest pace in the region, the International Monetary Fund forecast in April.

Indonesian banks have the best loan profitability among the world’s 20 biggest economies, based on the 7.3 percent average net interest margin of lenders with a market value of more than $5 billion, data compiled by Bloomberg show. In Japan, the average among lenders on the Topix Banks Index is 1.33 percent, the slimmest in Asia, the data show.

Sumitomo Mitsui reported a net interest margin of 1.16 percent for the three months through December. At Jakarta-based BTPN, that metric stood at 13 percent in the same period.

BTPN has 19,000 employees and more than 1,000 branches. It boosted profit by 41 percent to 1.98 trillion rupiah last year, data compiled by Bloomberg show. Earnings have jumped more than five times since 2008, the first full year after TPG made its initial investment in the lender.

TPG, a Fort Worth, Texas-based private equity firm, owned 58 percent of BTPN as of Dec. 31, according to data compiled by Bloomberg.

Investing Abroad

Sumitomo Mitsui has stepped up investments abroad over the past year. In December, it paid HK$3.3 billion ($425 million) to double its stake in Bank of East Asia Ltd., Hong Kong’s largest family-run lender, to 9.5 percent. The bank was also part of a group that bought Royal Bank of Scotland Group Plc’s aircraft leasing unit for about $7.3 billion in 2012.

In 2007, Sumitomo Mitsui bought 15 percent of Vietnam Export-Import Commercial Joint Stock Bank, known as Eximbank, for $225 million.

Mitsubishi UFJ in December agreed a 15.5 trillion dong ($740 million) deal to buy 20 percent of VietinBank, or Vietnam Joint Stock Commercial Bank for Industry and Trade. Japan’s largest bank has also expressed interest in purchasing a stake in Bangkok-based Bank of Ayudhya Pcl from General Electric Co., lending unit Deputy President Takashi Morimura said in January.