DBS Seeks to Tap $289 Billion Opportunity in Indonesian Wealth

  • Bank focusing on onshore business, according to consumer head
  • Tax amnesty prompted Indonesians to report undeclared assets

DBS Group Holdings Ltd., Southeast Asia’s largest lender, is focusing on expanding its wealth business in Indonesia, where a tax amnesty has prompted rich citizens to declare billions of dollars that are now being targeted by private banks.

The acquisition of some Australia & New Zealand Banking Group Ltd. businesses in Asia will boost DBS’s Indonesian retail and wealth customer base by about six times, according to Tan Su Shan, the Singaporean lender’s head of consumer banking and wealth management. The bank also plans to offer mobile-banking services, she said in an April 5 interview.

DBS is joining rivals including Oversea-Chinese Banking Corp. in vying for a slice of an Indonesian wealth-management market made more alluring after the nine-month tax amnesty spurred individuals to reveal some $365 billion of previously undeclared assets. About $289 billion of that total is parked onshore, money that the government recently permitted to be invested in assets including gold, property and infrastructure projects.

“The customers that took the tax amnesty and moved their money back, they will be looking for opportunities to invest onshore,” said Tan, 49.

Before the new rules took effect, investment choices for rich Indonesians were limited primarily to stocks and government bonds. Those options will increase rapidly because the government is “very serious about developing the onshore wealth market,” Tan said.

“Right now the onshore platform is not as robust as in some of the international financial cities, but there lies an opportunity for us to grow our platform,” she said. For example, Tan said DBS may offer so-called fixed maturity products that package several corporate bonds together into a unit trust.

Danamon Bid

DBS will see its total wealth and retail-banking customers in Indonesia leap to more than 600,000 from below 100,000 after integrating ANZ’s operations in the country, Tan said. The purchase was part of a broader acquisition of the Melbourne-based bank’s retail and wealth businesses in five countries that was announced in October and is due for completion early next year.

With that deal, DBS is poised to finally establish a sizable presence in Southeast Asia’s largest economy, more than three years after bank ownership rules stymied its attempt to buy PT Bank Danamon Indonesia.

The lender isn’t the only foreign firm seeking to profit from the tax amnesty, which ended on March 31 and attracted more than 970,000 participants. A unit of OCBC, DBS’s largest Singaporean rival, is awaiting approval from Indonesia’s financial services authority, known as OJK, to launch its private bank.

Other overseas banks have stumbled in their forays into Indonesia. Julius Baer Group Ltd., one of the first foreign firms to get an investment advisory license in Indonesia, closed its Jakarta office last year, a move described by a spokeswoman as “a pure business decision.” Credit Suisse Group AG shuttered its onshore wealth unit in 2011, according to a person familiar with the matter.

DBS’s Tan remains focused on the growth potential: “Indonesia will probably come up with more and more products for onshore wealth platforms. I am bullish, I want to invest more in it.”

— With assistance by Fathiya Dahrul, and Giles Broom

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