DBS

DBS: UOB Kay Hian notes that DBS has not received any official written notification from Bank Indonesia, which the group also has to wait for MAS and Bank Indonesia to commence and conclude their negotiation on reciprocal arrangements. Further delay is likely, creating intractable uncertainties for the acquisition. Management at DBS has stressed that majority control of Bank Danamon is important for branding and integration of IT systems. The deduction to core capital is also punitive under Basel III if DBS only manages to acquire an associate stake. Therefore, DBS is unlikely to proceed with the acquisition if it is restricted to acquire only a 40% stake in Bank Danamon. The deal is subject to lots of uncertainties: i) DBS disclosed that it has not received any official written notification of the above-mentioned approval from Bank Indonesia. It has not made any follow-up announcement. As such, UOB KH believe DBS has not received any official written confirmation yet. ii) DBS is in a delicate situation of having to wait for both central banks, MAS and Bank Indonesia, to initiate discussion. There is no definite time frame to conclude the negotiation. Further delays should therefore not be a surprise. UOB Kay Hian maintains a BUY, with TP of $20.80.