OCBC to acquire Indonesia’s Bank Commonwealth for $191 million

Bank OCBC NISP (OCBC Indonesia) will pay CBA 2.2 trillion rupiah (S$191 million) for a 99 per cent shareholding in the unit, Bank Commonwealth, and acquire the remaining 1 per cent from other shareholders.

Bank Commonwealth – set up in 1997 as a CBA venture with Bank International Indonesia – serves around 1.2 million clients, including retail customers and small and medium-sized enterprises. 

CBA became its controlling shareholder in 2002.

The bank’s net asset value stood at 4.1 trillion rupiah while its net tangible assets were valued at 3.5 trillion rupiah as of Sept 30.

The deal, which will involve Bank Commonwealth becoming a unit of OCBC Indonesia, needs approval from the Indonesia Financial Services Authority and the Monetary Authority of Singapore.

It is expected to be completed in the second or third quarter of 2024, noted a statement by CBA on Thursday, adding that the sale meets its strategy of focusing on its banking business in Australia and New Zealand.

OCBC said its Indonesian subsidiary has sufficient financial resources to fund the proposed acquisition, which is not expected to have a material impact on its net tangible assets, earnings per share or capital position for the financial year ending Dec 31.

“Bank Commonwealth will be merged into OCBC Indonesia after the proposed acquisition. OCBC Indonesia will be working closely with (the bank) on the migration of customers and employees to ensure a smooth transition,” it added.

The deal marks OCBC group chief executive Helen Wong’s first takeover since she took the helm of Singapore’s second-largest bank in 2021.

Ms Koh Ching Ching, OCBC’s head of group brand and communications, told The Straits Times that the proposed acquisition will allow the group to better support increasing trade and investment flows between ASEAN and Greater China.

There is little overlap in client relationships between Bank Commonwealth and OCBC Indonesia, she said.

“Bank Commonwealth also has demonstrated capabilities in wealth management and auto joint financing that can be leveraged to broaden OCBC Indonesia’s product offerings and diversify its customer acquisition channels.”

Mr Thilan Wickramasinghe, Singapore research head for Maybank Investment Banking Group, said Indonesia is a prime growth market in ASEAN and a chief beneficiary of north-south supply chain reconfigurations.

“This is one of the main growth themes for Singapore banks... so we expect them to look to Indonesia as a critical contributor for driving higher returns,” he added.

OCBC rival UOB is also growing its presence in Southeast Asia with its acquisition of Citigroup’s consumer banking businesses in Malaysia, Thailand, Vietnam and Indonesia.

Singapore’s banks – DBS, OCBC and UOB – are already among the largest foreign lenders in Indonesia, noted Mr Willie Tanoto, a director in Fitch Ratings’ financial institutions team.

OCBC is the second-largest foreign bank in Indonesia, although its market share in system loans and deposits is just above 2 per cent, while UOB and DBS each have a share of slightly more than 1 Percent, said Mr Tanoto.

The Bank Commonwealth deal is expected to add around 30 branches to OCBC Indonesia’s distribution network, he added, noting: “(Bank Commonwealth’s) financial performance has also been falling short of its expectations, so it is not likely to be immediately accretive to OCBC’s earnings or other key financial metrics.”

“Nevertheless, the consideration for the acquisition is reasonably small from OCBC’s perspective, and the acquisition signals OCBC’s commitment to the market,” he said.

Prisca Ang

The Straits Times

Asia News Network