Tuesday, December 27, 2005

Temasek exercise the merger of Indonesian banks

Temasek Holdings is reportedly exercising the merger of two of its subsidiary banks in Indonesia, the Bank International Indonesia (BII) and Bank Danamon, ahead of Central Bank's plan to implement single presence policy sometime next year. The policy would ban cross-ownerships in banks.
Investor Daily reported today that Temasek is preparing the plan to merge BII and Danamon. "Discussions are underway, but they are purely for internal purpose," said a source to the newspaper.
Temasek controls 59% of Danamon and 31% of BII. The merger of BII and Danamon would create a bank with total assets of Rp110 trillion (US$11 billion) and ranked fifth in the country behind Bank Mandiri, Bank Central Asia, Bank Negara Indonesia (BNI), and Bank Rakyat Indonesia (BRI). Temasek has another subsidiary PT Bank DBS Indonesia. A three-way merger of BII-Danamon-DBS would create a bigger bank than BRI.
Other shareholder that might be forced to merge their banks is Khazanah Nasional Berhad, Malaysia. The company has shareholdings in Bank Niaga (indirectly through Commerce Asset Berhad) and Bank Lippo (through Santubong Investment).
Standard Chartered (UK) might also have to merge its recently acquired Bank Permata with Standard Chartered Indonesia.
Djarum Group should merge BCA (Djarum is the co-owner of Farindo Investment which controls 51% shares) with two banks, Bank Haga and Hagakita, controlled by founding family of Djarum Group. Panin Group also has cross-ownership in Bank Panin and Victoria.
While it is positive to consolidate the banking industry, opposition may come from minority shareholders, especially for publicly-listed banks. Besides, there is controversy surrounding the state-owned banks. If the policy should be implemented accross-the-board, government should merge five state-owned banks (Mandiri, BNI, BRI, BTN, and BEI) with most likely huge political shakeups.

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