JAKARTA (TheInsiderStories) - South Korean Shinhan Bank took a 75 percent stake in Centratama Nasional Bank (CNB), which has 41 sales networks across Indonesia, in a move to expand into the market. In late November, the bank has acquired 98 percent of Bank Metro Express (BME) that has 19 networks, the bank said in announcement.
Shinhan Bank said it was planning to launch the combined bank of CNB and BME under the name Shinhan Indonesia Bank in 2016. It did not provide details of the acquisition prices. The bank said its strengthened operations in Indonesia through the acquisitions will pave the way for its expansion in other emerging markets.
In the banking industry, mergers and acquisitions (M&As) are recognized as a shortcut for a bank to enter new and less-developed markets. In recent years, Korean banks struggling with low growth and low margins have looked to global markets to find a breakthrough or new growth driver.
For this year, Shinhan aims to earn 10 percent of its net profit from overseas operations through expansion in emerging markets. Last year, Shinhan earned 8.3 percent of its overall net income from overseas businesses, largely in Asian countries.
Currently at least four larger banks from China, Korea and Taiwan are looking to acquire smaller Indonesian banks. Among it, China Construction Bank Corp., which plans to buy two to three small Indonesian banks.
The deputy commissioner for banking supervision of Financial Service Agency (OJK) Irwan Lubi said, intends for the Chinese lender to have core capital of at least 5 trillion rupiah ($359.71 million) in Indonesia, within five years.
Lubis said that the CCB and the Shinhan Financial Group had finalised a target Indonesian bank, each, but were yet to submit their formal applications to the OJK for acquisition of local banks in Indonesia.
The overseas banks are said to be interested in activities related to construction and other priority development sectors in Indonesia, such as infrastructure, agriculture and maritime.
Indonesia’s current banking laws stipulate that foreign banks can make such acquisitions only if they acquire two or more local banks. Otherwise, foreign banks are allowed to operate in Indonesia by opening new branch offices and by acquiring or merging with local banks, or opening representative offices with limited activities.
In the meantime, the House of Representatives is in the midst of deliberating a new draft of the banking bill that aims to protect local banks against foreign banks influx. The draft bill focuses on the status, ownership and operation limits of foreign banks in Indonesia and aims to revise the current banking law, which was ratified in 1999.
As of December, Shinhan Bank has advanced to most major Southeast Asian markets, including Vietnam, Cambodia, Indonesia, Singapore, Myanmar and India, it said. It runs a total 73 branches in 16 countries.
Indonesia has a population of 250 million and accounts for about 40 percent of the combined gross domestic product of the Association of South-East Asian Nations.