Indonesia drops plan to lower foreign ownership in banks
Posted on 15 February 2012 - 05:38am
PETALING JAYA (Feb 15, 2012):
Malaysian banks with stakes in Indonesian financial institutions no
longer need to sell down their holdings as Indonesia is reportedly not
going ahead with a plan to limit ownership.According to a Reuters report yesterday, Indonesia's state deposit agency (LPS) said the country will not implement a planned regulation to limit ownership in domestic banks because it does not want to scare away potential foreign investors from the sale of state-owned Bank Mutiara.
An analyst with a local research firm said the move will stimulate interest in banking stocks with Indonesian exposure like Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd.
"Right now, it is status quo. It is difficult to pre-empt anything yet," she said.
Analysts had previously expressed concern about the Indonesian move to implement the bank ownership cap as it will hurt the Malaysian banks' earnings.
CIMB climbed 15 sen to 7.31 and Maybank added two sen to RM8.52 yesterday.
The move to drop the controversial plan mooted by the central bank last year should give greater certainty to foreign investors looking to buy banking assets in Indonesia and lead to greater consolidation in the sector.
The plan had thrown a spanner in mergers and acquisitions dealmaking in Indonesia's financial sector and led to worries about the need for existing major shareholders to sell their stake to below 50%.
Currently, Indonesia allows foreign banks to own up to 99% of local banks.
Maybank's Bank Internasional Indonesia (BII), which is one of Indonesia's top 10 banks, has 344 branches, almost the same as Maybank's 386 branches in Malaysia.
Maybank holds a 95% stake in BII, which contributes less than 10% to the group's earnings.
CIMB's Indonesian unit, PT Bank CIMB Niaga Tbk, accounted for about 30% of CIMB Group's pre-tax profit for the first nine months of 2011. CIMB owns a 97% stake in CIMB Niaga.
Both banks had previously said the income from Indonesian operations would continue to grow.
"This is positive for the banks with exposure to Indonesian banks, as well as investors. Previously, investors were trimming their shares as they were worried that ownership cap will impact their future returns and earnings," said an analyst with another broking house.
A banking analyst said the latest development may also re-ignite interest of local financial institutions to buy into Indonesian banks.
According to recent reports, RHB Bank had expressed its intention to acquire an 80% stake in PT Bank Mestika Dharma for RM1.16 billion. And Affin Holdings Bhd may revisit its plan to acquire Indonesia's PT Bank Ina Perdana.
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