BoI buys Indonesian bank for $25 million
State-owned Bank of India (BoI) on Monday announced the acquisition of a controlling 76% stake in Indonesian bank PT Bank Swadesi at an estimated cost of $20-25 million.
The acquisition comes at a time when other foreign banks are also buying out Indonesian banks. Agency reports have said that Commonwealth Bank of Australia has decided to buy a majority stake in PT Bank Arta Niaga Kencana. These reports said that “the Indonesian central bank expects about 40% of the nation’s banks to be acquired by overseas companies or merged in the next four years.
Central bank governor Burhanuddin Abdullah had said in September that the nation will have 70-80 lenders by 2010 against the current 131.” PT Bank Swadesi is partly owned by persons of India origin and part of its equity capital is listed on the local exchange. The bank has four branches, six sub-branches (which can undertake only limited banking activities), six cash points and a mobile ATM van. It has an asset base of $100 million, a deposit base of $75 million and a net worth of $11 million.
BoI is the third Indian bank to acquire an overseas bank after State Bank of India and ICICI Bank. SBI had announced the acquisition of banks in Indonesia, Mauritius and Kenya. ICICI Bank, too, had bought out a small Russian bank a couple of years ago.
Indian banks are looking at scaling up their overseas operations in a bid to boost their share of total income from international operations. With more local firms expanding their global operations, Indian banks want to be part of such plans by offering financing support. The buyout route is also preferred because approvals to set up new branches tend to take time besides calling for high capital requirements.
“The capital required for setting up banks in Indonesia is as high as $300 million. Instead, it is far more feasible to acquire a bank,” KR Kamath, executive director, BoI, told ET.
The Mumbai-based BoI has been working on this deal for over a year. The bank’s board had approved the proposal to acquire an Indonesian bank more than a couple of years ago.
Though the sale-purchase agreement was signed between the bank and the major shareholders on December 11, it would be subject to approvals from the banking and capital market regulators in Indonesia. BoI has been operating in Indonesia for the last 33 years through its representative office.
Last year SBI had acquired a 76% stake in PT Bank IndoMonex of Indonesia. However, unlike PT Bank Swadesi, it does not have the licence to provide foreign exchange-related services. Besides, SBI acquired 51% in Indian Ocean International Bank based in Mauritius and 76% in Giro Commercial Bank in Kenya.However, the Indonesian and Kenyan buyouts have not been concluded
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