DBS

DBS: has won approval by Indonesia's central bank to buy up to 40% of PT Bank Danamon, the country’s 6th largest bank. We note however that the approval fell short of the 67% stake (currently owned by Temasek Holdings) which DBS had initially planned for. The approval was in-line with Bank Indonesia’s earlier ruling that foreign banks are allowed to first take only a 40% stake in a local bank, following which the acquirer will be subjected to three financial-soundness test once every six month, before being granted approval to acquire a majority stake. This would mean that DBS could potentially take up to 18 months before if is able to attain a majority control of Bank Danamon. At this point of time, whether DBS will proceed with an initial 40% stake would largely be determined if it would be able to attain a meaningful stake in Bank Danamon, which is invariably tied to MAS willingness to approve greater access for Indonesian banks to operate within Singapore. DBS note that as of Tuesday evening ‘official written notification of the above approval has not been received from Bank Indonesia.’ We note that in past interviews, DBS CEO intends to pursue a universal banking model in Indonesia, if the acquisition is successful, citing that Indonesia is the only country where DBS intend to emulate its Singapore Universal Banking model, citing the synergies that can be realized given Bank Danamon’s strong retail presence, together with DBS expertise in corporate and investment banking.