Tue, 26 May 2009
Banks' scramble for stakes in Indonesia intensifies

By John Aglionby and Paul Betts

HSBC's completion of its acquisition of 89 per cent of Indonesia's Bank Ekonomi for $607.5m and the UK-based bank's move to buy out the rest of the shares speaks much about the potential for growth in the world's fourth most-populous nation.

Ekonomi's focus on small and medium-sized enterprises may have little overlap with HSBC's current operations but the SME market should not be overlooked.

Some 21 per cent of Indonesia's 230m population have no access to the financial sector and another 17 per cent use only microfinance institutions. Some 60 per cent of the country's gross domestic product comes from domestic demand.

HSBC is not alone in eyeing Indonesia. Barclays, its UK rival, is on the verge of opening retail operations after buying Bank Akita. ANZ, meanwhile, is also expanding its footprint, although the Australian bank's latest foray has been into the wealthier consumer sector.

A range of other foreign banks have bought into the country in the past two years. Among the biggest deals is Maybank's $2bn acquisition of Bank Internasional Indonesia.

But with few attractive assets left to be bought, foreign banks are keen to stake their claim in Indonesia.

Thanks to improved regulation, competition in the country's financial services market should be pretty fierce but fair, providing Indonesia's central bank does not further limit the number of foreigners allowed to work in the bank sector.



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