Bank consolidation efforts got a boost on Monday (11/12/06), with a senior central bank official confirming stake sales in local operations to foreign investors from China, India and Australia.
Relatively lenient regulatory restrictions on the size of foreign bank stakes are also a potent lure, said Adrian Chee, Standard & Poor's financial services director. Bank Indonesia (BI) allows foreign investors to own up to 99% in domestic banks.
"A lot of other bank systems in the region have tight constraints on foreign ownership, but Indonesia doesn't have these restrictions in place," Chee said, according to Dow Jones Newswires.
Analysts say that the prospect of control is likely a prime motivator behind the most anticipated deal announced Monday -- the purchase of a more-than-50% majority stake in Bank Halim, a small lender based in Surabaya, by state-owned Industrial & Commercial Bank of China.
"ICBC is buying a majority share in Bank Halim... (the stake) is over 50%," BI Deputy Governor Siti Fadjriah said. Fadjriah declined to comment on how much ICBC will pay for the Bank Halim stake.
She also said Bank of India will sign a sales and purchase agreement with Surabaya-based Bank Swadesi in the first quarter of 2007, while Australia & New Zealand Banking Group Ltd (ANZ) and Commonwealth Bank of Australia are also seeking to "buy banks" in Indonesia.
Commonwealth Bank has bought a more-than-50% share in another Surabaya-based operation, Bank Arta Niaga Kencana, Fadjriah said. A Commonwealth Bank spokesman confirmed stake purchase talks with Arta Graha Kencana were ongoing.
Bank Halim, ICBC's first overseas bank investment, marks the Chinese lender's efforts to start small as part of a long-term strategy to develop a regional banking network, analysts say.
Indonesia's medium and small-sized banks, including Bank Halim and Bank Swadesi, offer foreign investors opportunities for stakes in geographical "niche players" with a highly attractive medium-term growth outlook, Chee said.
"The opportunities in (foreign investors') home countries are already limited, while our market is still big (and) is proven successful by foreign banks who are here already," Peter B Stok, chief executive officer of Bank Niaga, said.
An ANZ spokesman in Sydney told Dow Jones that the bank is interested in expanding its presence in Indonesia in the longer term, but said "there are no bank (acquisition) opportunities at present". ANZ chief executive, John McFarlane, said in October that ANZ would like to increase its presence in Indonesia where it has a stake in both Bank Pan Indonesia and ANZ Panin Bank.
Fadjriah said that several Middle East-based banks have expressed interest in buying stakes in existing shariah banks or establishing new ones in Indonesia.
Japan's Acom Co and Bank of Tokyo-Mitsubishi said last month they will jointly buy a 75.4% stake in Indonesia's small size lender Bank Nusantara Parahyangan.