PT Bank Woori Indonesia and PT Bank Himpunan Saudara 1906 Tbk (SDRA) have formally announced their merger plan to make a bank with combined asset of Rp15.63 trillion. South Korean Woori Bank will control a majority of 66.66% shares in the bank to be called Bank Woori Saudara Indonesia 1906 (BWSI). Implications for other merger plans, including Danamon-DBS?
The Financial Service Authority (OJK) has repeatedly expressed its support for the plan. We, however, have to wait whether Woori-Saudara merger will be approved. They expect OJK to grant its approval for the merger on December 11, 2014.
If approved, shareholding structure of the bank (BWSI) will be Woori Bank, South Korea (66.66%), Arifin Panigoro (12.45%), Bank Danamon Indonesia (2.75%), Medco Intidinamika (1.68%), Medco Duta (1.485), and public (14.98%). Danamon is currently owner of 4.82% of Bank Woori Indonesia.
The merger is a lesson learnt for Danamon, especially if its parent, Temasek, would revisit a plan to allow DBS Bank Ltd acquiring Bank Danamon and later on consolidating it with Bank DBS Indonesia.
The second test, of course, will be in OJK’s decision on the proposal from Sumitomo Mitsui Banking Corporation (SMBC) to merge its Indonesian unit PT Bank Sumitomo Mitsui Indonesia (BSMI) and Bank Tabungan Pensiunan Nasional (BTPN), where SMBC has 40% shares.
Muliaman D Hadad, chief commissioner of OJK, said in June 2014 that SMBC has signed letter of intent for such merger in March 2014. “They haven’t set the schedule for the merger, but we will wait,” said Muliaman.
Such merger will enlarge SMBC’s ownership in BTPN because BSMI had total assets of Rp42.34 trillion and equity of Rp6.15 trillion as at June 30, 2014. BTPN, meanwhile, had total assets of Rp71.41 trillion and equity of Rp11.17 trillion. SMBC’s ownership after the merger will likely grow to above 51% with combined assets of Rp114 trillion.
If both Woori+Saudara and BSMI + BTPN would go through, it is fair to expect that OJK will also approve a proposed merger of Danamon and DBS to create a bank with combined assets of Rp243.1 trillion, right?
The combined assets will still be significantly smaller than state bank BNI (Rp408 trillion) and will only one-third of Bank Mandiri (Rp765 trillion). So, why worry?
Should we ask reciprocity principle to Japan and South Korea when we allow Woori and SMBC acquiring Indonesian banks and then launch the merger with their existing Indonesian units?
We did in fact! Bank Indonesia and Japan Financial Services Authority agreed in late 2013 to implement reciprocity for banks between the two countries. Indonesian banks, started by BNI, which open branch in Osaka, will be able to open branches and expand their business in Japan.
How about South Korea?
OJK said in July that it would sign agreement with South Korea’s financial authorities for reciprocity.
Looks like that DBS-Danamon deal won’t be approved by OJK unless Singapore signs similar agreements. Until late last month, Bank Mandiri CEO Budi G Sadikin still complained about difficulties for Indonesian banks to open branches in Singapore. “Singapore banks already own more than 900 branches here, Malaysia more than 1400 branches, while we asked only one, but not allowed there,” said Sadikin.
Are there non-competition issues behind?
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