Nasution: ‘We will finish the regulations in a month ...’
Reuters/Jakarta
Indonesia will issue new rules on bank ownership next month that may jeopardise a $7.3bn bid by Singapore’s DBS Group to buy a local lender, the latest policy shift to worry investors.
Indonesia’s central bank first proposed rules to cap bank ownership last year and temporarily barred takeovers in the sector before the DBS bid to buy Bank Danamon this month stoked nationalist opposition by anxious local rivals.
The central bank said it will review the plans to acquire all of Danamon after the new rules are issued in late May. The takeover, if allowed, would be Indonesia’s largest foreign takeover and Asia’s fourth-biggest banking deal.
DBS officials declined to comment on the central bank announcement.
Shares in Danamon, which jumped 50% after the bid was announced, slid up to 9.5% yesterday after the central bank announcement and closed 6.4% down.
“This will have a negative impact in the short term on Indonesian banking stocks as well as M&A deals in that sector,” said Winston Sual, chief executive of Jakarta-based PT Panin Asset Management, which manages $1bn in assets including Indonesian banking stocks.
Central bank governor Darmin Nasution said the rules will still allow investors to have majority ownership in Indonesian banks. Indonesia has some of the region’s most open ownership rules on banks, allowing foreigners to own up to 99%.
“We will finish the regulations in a month ... I don’t want to say the percentage yet,” Nasution said.
The central bank previously said it wants equal access for Indonesian lenders to expand in Singapore and getting that will be a factor in its decision on whether to approve the DBS move to buy Danamon from Singapore state investor Temasek.
Indonesia’s economy has been drawing strong investor interest in recent years for its booming domestic demand and resources, but since rating agencies stamped it with an investment grade status in January, policymakers have rattled sentiment with a series of proposals on mining and foreign asset ownership.
Nasution said he had talked to the chairman of Singapore’s central bank while both were in Washington about reciprocity in the two nations’ banking sectors.
The new regulations will also cover the multiple licences banks need to run operate in Southeast Asia’s largest economy, such as licences for installing new ATMs, Nasution said.
Some Indonesian bankers have said they would try to block the DBS deal and were considering a media campaign targeting public opinion in the hope of influencing politicians. Local rivals face stiffer competition from expanding foreign banks.
DBS CEO Piyush Gupta has told Reuters that Indonesia will find it difficult to block his bid for Danamon based on current rules and any rejection could dent investor sentiment.
Indonesia regained its investment grade rating from two agencies after 14 years, but confusion over policy began driving away foreign money this year.
The country’s rupiah is emerging Asia’s worst performer this year. The stock market has risen 9%, but lags gains in other Southeast Asian markets.
Indonesia banking shares were also mostly weaker yesterday, with Bank Tabungan Pensiunan Nasional down 1.4% versus a Jakarta market down 0.4%.
Shares in DBS, Southeast Asia’s largest bank, rose 2% yesterday, after it surprised analysts by posting record quarterly profit.
Panin’s Sual said he sold his holdings in Danamon after the stock jumped in early April following the DBS bid. He said investors need to wait to see what the Bank Indonesia will announce before making any moves.
“I think in the long run it could bring a positive impact, as the controlling shareholder of a bank will be smaller, so that more portfolio investors could invest,” Sual said.