Bank of Tokyo-Mitsubishi UFJ (MUFG) intends to buy Danamon shares from Singapore state investor Temasek Holdings, a major shareholder, said two sources, who declined to be named as the talks were not public.
Faced with sluggish growth at home, MUFG has expanded its presence in South-East Asia in recent years, and already holds stakes in Vietnam’s Vientinbank, Thailand’s Bank of Ayudhya and Security Bank Corp of the Philippines.
MUFG plans to invest in Indonesia’s fifth-largest bank in the financial year starting April 2018, and is aiming to reach a basic agreement this year, the first source said.
But according to the second source, talks were in early stages and it was not certain if the deal would be confirmed.
“The company is strategically considering various investment opportunities in Indonesia,” an MUFG representative said, adding that domestic media reports on plans for a Danamon stake were not based on any announcement made by the company.
Temasek declined to comment, while an official at the Indonesian Financial Services Authority said there had not been “any submission from MUFG to own or enter Bank Danamon”.
Danamon lends primarily to the retail and corporate sectors and is a major private player in microfinance. Singapore’s DBS Group Holdings had sought to buy a controlling stake in Danamon in 2013, but dropped the bid after Indonesia changed laws to restrict single ownership in banks to 40%.
However, Indonesia can relax these curbs on special grounds, including if the investing bank is financially strong.
Temasek, one of the world’s biggest investors, currently owns about 68% in Danamon.
MUFG has future plans to seek a majority stake in Danamon if it gets regulatory approval, the first source said.
The Indonesian banking sector has attracted several deals over the past few years, as Asian lenders look to get a foothold in the world’s fourth-most populous nation.
South Korean Shinhan Bank acquired a majority stake in Bank Metro Ekspress in 2015, while China Construction Bank entered the Indonesian market by acquiring Bank Windu in 2016.
MUFG’s last major acquisition in the region was a 20% stake in Security Bank bought in 2016, in line with its efforts to grow its global banking business amid low interest rate policies and strict capital regulation at home.
In the year ended March 2016, MUFG’s global banking business accounted for 31% of its net operating profit, up from 17% in the year ended March 2012. – Reuters