Indonesia's Most Valuable Bank Prowls for Acquisition Targets

(Bloomberg) -- PT Bank Central Asia is seeking to buy a mid-size lender as intensifying competition and a sluggish Indonesian economy prompt some owners to consider exiting the industry, according to the firm’s top executive.

Southeast Asia’s largest lender by market value after DBS Group Holdings Ltd. has set aside about 4 trillion rupiah ($295 million) this year to finance an acquisition, President Director Jahja Setiaatmadja said. While there have been several offers, the Jakarta-based bank, majority-owned by billionaires Budi Hartono and Michael Hartono, is yet to zero in on one, he said.

Demand for loans is dwindling as Indonesian companies delay fresh investments and banks focus on cleaning up bad debts accumulated during the commodity slump. Indonesia’s banking regulator is urging consolidation of the industry, where more than 100 banks operate, making it tough for smaller lenders to compete.

“Many offers came to us but we haven’t found a suitable one,” Setiaatmadja said in an interview on Oct. 26. “We’re looking for a good bank that’s facing difficulties in running the business. We’re open to purchasing small or mid-sized banks, as long as we’re capable.”

In August, Bank Indonesia cut its 2017 loan-growth target to a range of 8 to 10 percent from 10 to 12 percent earlier and almost 20 percent annual growth in the past decade.

The Financial Services Authority, known as OJK, is pushing for banking efficiency to lower interest rates as part of its five-year agenda through 2022. The regulator will seek more consolidation in the banking and non-banking financial industry, including Islamic lenders, it said earlier this month.

Bank Central Asia’s potential acquisition will be structured to keep its capital adequacy ratio at at least 18 percent, Setiaatmadja said. The lender, known as BCA, reported an 11 percent increase in net income to 16.8 trillion rupiah in the nine months ended September. Its capital adequacy ratio climbed to 23.6 percent from 21.5 percent a year earlier, an exchange filing showed.

Shares of BCA have jumped 32 percent this year, setting them on course for a ninth straight annual gain.

BCA is working to expand its footprint in digital banking, akin to peers such as Singapore’s DBS, said Setiaatmadja.

“I want to develop the digital business so that we can introduce our services to Vietnam and the Philippines,” said Setiaatmadja, who’s worked at BCA for more than 20 years. “That would mean we won’t need to make heavy investments opening branches outside Indonesia.”

--With assistance from Harry Suhartono and Rieka Rahadiana

To contact the reporters on this story: Fathiya Dahrul in Jakarta at fdahrul@bloomberg.net, Tassia Sipahutar in Jakarta at ssipahutar@bloomberg.net.

To contact the editors responsible for this story: Thomas Kutty Abraham at tabraham4@bloomberg.net, Russell Ward, Paul Panckhurst

©2017 Bloomberg L.P.