JAKARTA (TheInsiderStories) – Mitsubishi UFJ Financial Group Inc. ((MUFG), a Japanese bank holding and financial services company has recognized impairment losses on shares of PT Bank Danamon Indonesia Tbk (IDX: BDMN), an Indonesian commercial bank and consolidated subsidiary of MUFG Bank. Shares of the local lender have tumbled since and this month hit their lowest in nearly three years, at Rp3,640.
The unit of MUFG said it would book a one-off charge of about JPY207.4 billion (US$1.91 billion) for the quarter ended Dec. 31 due to a drop in the share price of an Indonesian subsidiary. The bank hold 94.1 percent of Bank Danamon shares.
On Monday (12/30), BDMN shares closed at Rp3,950 a unit on the Indonesia Stock Exchange’ last trading day. Under accounting rules, if Bank Danamon‘ shares close below 50 percent of the average price MUFG paid for its stake, the Japanese bank is required to reassess the value of the holding and book a one-time charge.
MUFG does not disclose the price level where it would be required to book an extraordinary charge. It has built up its stake through a series of acquisitions since 2017. In April it more than doubled its holding to 94 percent from 40 percent, paying Rp9,590 a share, according to a filing.
The strategic investment in Bank Danamon has proceeded in stages since December 2017, and as announced on April 29, 2019, and became a consolidated subsidiary of MUFG and MUFG Bank upon the 3rd step of additional investment.
“Should there be any change to MUFG’ full-year consolidated business performance target of JPY900 billion in profits attributable to owners of parent, it will be disclosed appropriately,” said MUFG in an official statement.
It said, Bank Danamon boasts an extensive and robust business base in Indonesia as well as a high level of profitability, and it plays an extremely important role in MUFG’ global commercial banking business strategy. The Japanese bank added there will be no change in MUFG’ business strategy, which includes Bank Danamon, after posting the loss.
Going forward, MUFG will drive further synergies and will pursue the provision of comprehensive financial services to customers doing business in the Indonesian market, along with contributing to the growth of the Indonesian economy.
US$1: 108.8 Yen
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