OCBC to benefit from RI bank stake

OCBC to benefit from RI bank stake

Singapore, Dow Jones

Singapore's Oversea-Chinese Banking Corp. Ltd.'s move to buy a stake in Indonesia's PT Bank NISP is likely to be positive for the Singapore lender, analysts said on Wednesday.

Singapore's No. 3 lender by assets late on Tuesday said it will buy a 22.5 percent stake in Bank NISP for around S$119 million (US$70 million). Bank NISP has total assets of about S$3.05 billion at the end of 2003, and is ranked 12th among Indonesia's banks in terms of assets.

The acquisition will place OCBC as Bank NISP's second-largest shareholder and position it "for long-term growth in the large Indonesian market," OCBC said.

The Singapore bank also said over time it planned to acquire a majority stake in Bank NISP, which has been its joint venture partner in Indonesia since 1996.

The amount OCBC is paying for the initial stake in the Indonesian bank pales in comparison to the S$2.9 billion it will pay to take control of insurer Great Eastern Holdings Ltd., and its S$5.2 billion purchase of Keppel TatLee Bank in 2001, but is still viewed as a positive step by the bank.

"We view this acquisition positively," said Leng Seng Choon, an analyst at UOB-Kay Hian Securities, in a research note.

"The Indonesian operations will complement that of its (OCBC's) existing operations. It also points to OCBC's intention to want to expand regionally," Leng said.

While rivals DBS Group Holdings Ltd. and United Overseas Bank Ltd. have been busy trying to expand their regional footprint in recent years, OCBC has been relatively quiet and has focused on its core markets of Singapore and Malaysia.

OCBC said the latest acquisition, its first in Indonesia, was consistent with its three-year plan to grow into "a high- performance bank, strengthening its position in Singapore and Malaysia while seeking overseas growth opportunities at the same time."

UOB-Kay Hian's Leng said the proposed transaction will be "earnings accretive" for OCBC Bank and he is keeping a Buy call on the stock, with a S$15.00 price target. At 0430 GMT (1.30 p.m. Jakarta time), OCBC shares were trading at S$11.80, 0.9 percent higher than its Tuesday close.

In addition to having a large growing market with a population of about 230 million, Indonesia's geographic, economic, linguistic and cultural characteristics bear many similarities to Malaysia, a market OCBC is familiar with.

NISP operates 135 branches and offices with a staff strength of about 2,700 in the sprawling archipelago, serving mainly small and medium enterprises, but has focussed in recent years in growing its consumer banking business, OCBC said in the statement.

For the year ended Dec. 31, 2003, Bank NISP's net profit was Rp 171 billion ($19.9 million), representing a return on equity of 18.8 percent.

OCBC said the purchase price represents a premium of 47 percent over Bank NISP's last traded price. Bank NISP shares rose 2 percent on Tuesday to Rp 440.

The purchase price was determined based on approximately 2.5 times the audited net tangible asset value of Bank NISP of Rp 1.07 trillion in total as at Dec. 31, 2003.

Indonesian banks have been attracting interest from Singapore recently, mostly from the government investment arm - Temasek Holdings.

Last year, Temasek and Deutsche Bank AG jointly bought a 51 percent stake in Indonesia's fifth-largest lender, Bank Danamon Indonesia, for $350 million.