OCBC’s Indonesia Arm Set to Expand

By webadmin on 02:33 pm Aug 08, 2012
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Wahyudi Soeriaatmadja – Straits Times

Jakarta. The Indonesian arm of Singapore’s OCBC Bank is looking to expand its business in Jakarta.

It has its eye on several Indonesian finance companies that give loans for items such as cars and motorcycles.

Based in Jakarta, Bank OCBC NISP is 85.1 percent owned by its parent Singapore bank.

OCBC NISP’s managing directors said on Tuesday that it is assessing five to 10 finance companies in the hope of acquiring one or more that it feels comfortable with.

“We would go ahead if we find the right match which would trigger synergy,” managing director Rama P. Kusumaputra told The Straits Times.

While he did not want to spell out a timeframe or go into specifics, he said several of the companies had approached the bank over the past year.

Such acquisitions would accelerate the bank’s business growth, he said, adding that it is seeing a comfortable asset growth of between 25 percent and 30 percent.

Another managing director, Hartati, added that the bank was in talks with several of these finance companies.

The planned expansion comes at a time when foreign investors are feeling the heat from growing nationalist sentiment.

DBS Group’s bid in April to acquire Jakarta-based Bank Danamon touched off a backlash. State-controlled banks, analysts and politicians have demanded ownership restrictions on foreign investors.

Indonesia’s largest lender Bank Mandiri appealed for a reciprocity rule, which would give Indonesian banks wider access to any country whose banks have opened branches in the country.

The outcry prompted the central bank to announce new regulations last month on such acquisitions, but some still feel these do not protect domestic interests far enough.

But OCBC NISP’s officials are confident its planned move will not run into headwinds, as the bank is based in Indonesia.

Analysts agree.

“It would be a small transaction with a small magnitude,” analyst Pang Tek Djen told The Straits Times.

The Indonesia’s central bank this year also imposed tighter regulations on finance firms, setting a minimum down payment of 30 percent and 25 percent of value for the purchase of cars and motorcycles.

Finance companies had the liberty to set the amount previously. Some allowed customers to take home a motorcycle with only 500,000 rupiah ($53) cash in initial payment. Nowadays, at least three million rupiah is required.

“Some may see this as a challenge. Others may think the industry is getting more attractive because it is safer,” Rama said, referring to the lowered risks of loan defaults with the tighter regulations.

If OCBC NISP goes ahead with an acquisition, it would follow in the footsteps of similar deals earlier, where banks expanded their consumer lending activities by acquiring business networks owned by existing finance companies.

Reprinted courtesy of The Straits Times