www.thejakartaglobe.com - Fitch Ratings says the central bank’s new rule on bank ownership will
likely expedite banking consolidations but will pose challenges for
smaller lenders.
A day after Bank Indonesia announced its new
rule to cap the ownership of banks to 40 percent from 99 percent, Fitch
said in a report on Thursday that “the risk of failing to maintain the
Bank Indonesia criteria may be more pronounced at small- to medium-sized
banks facing undue business pressure.”
“This is notably because
of a concentrated shareholding structure, especially family-owned,
which has been cited as one factor behind bank failures in Indonesia in
the past,” the rating agency wrote.
The rule is expected to set a
clear platform for future bank acquisitions, as Indonesia has been
coaxing its 120 commercials lenders to consolidate through mergers and
acquisitions, hoping to help them better compete with regional peers. (source)
However,
Fitch said the rule, which became effective last Friday, would have no
immediate impact on the ratings of large banks because it was not
retroactive.
The top 10 banks, which account for 63 percent of
the country’s total banking system assets, are mostly state-owned or
foreign-owned by highly-rated institutions.
Analysts welcomed
the new rule but attributed an increase in Indonesian banking stocks on
Thursday to expectations of positive results in the first half.
Shares
of Bank Danamon Indonesia, which has been the target of a takeover by
DBS Group Holdings, rose on Thursday, as did those of rivals Bank
Mandiri, Bank Central Asia and Bank Rakyat Indonesia.
“It’s
because banks are expected to report good earnings for the first half;
it’s not solely about the bank ownership ruling,” said Raymond Kosasih,
an analyst with Deutsche Bank Verdhana Indonesia.
He said major
banks he covered, including Bank Mandiri, BRI, BCA and Bank Negara
Indonesia, were expected to have combined first-half profits of up to Rp
23.7 trillion ($2.5 billion), up 21 percent from the same period last
year.
DBS announced in April that it planned to acquire a 67.4
percent stake of Danamon from Temasek Holdings, Singapore’s sovereign
wealth fund. DBS would pay Rp 7,000 per share for the stake via a stock
swap that would result in Temasek owning 40 percent of DBS’s enlarged
capital, up from 29 percent currently. The acquisition is still waiting
for approval from Bank Indonesia and the Monetary Authority of
Singapore.
DBS Group spokeswoman Karen Ngui said DBS would carefully review Bank Indonesia’s new ownership rule.
“We
will be guided by Bank Indonesia on next steps and will continue to
work with them closely,” she said in an e-mail to the Jakarta Globe.
Danamon’s stock rose 1.6 percent to Rp 6,300 on Thursday, a 10 percent discount from the Rp 7,000 price proposed by DBS Group.
Fitch said Bank Indonesia’s rule would enable the country’s banking system to compete with its regional peers.
“Potential
investors, particularly long-term investors, may not be overly deterred
by the new regulations, as BI will have the discretion to allow a
higher ownership limit in Indonesian banks, which ranges from 20 percent
to 40 percent,” Fitch said.
Foreign ownership in Malaysia is capped at 30 percent and in Thailand at 25 percent.
Additional reporting by Muhamad Al Azhari
Source: http://www.thejakartaglobe.com/markets/bank-indonesias-ownership-rule-may-speed-up-mergers/531550 - July 20, 2012
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