JAKARTA (TheInsiderStories) – American investment company Farallon Capital Management L.L.C. is reportedly seeking to buy a 44.6 percent stake in local lender PT Bank Permata Tbk (IDX: BNLI) from U.K’s Standard Chartered PLC, local media reported.
Standard Chartered declined to comment while Bank Permata did not provide an immediate comment. Before Farallon, local tycon DR. Tahir–who’s owned PT Bank Mayapada Tbk (IDX: MAYA) has shown its interest to buy the bank’s shares.
Bank Permata is jointly owned by Standard Chartered and local conglomerate firm PT Astra International Tbk (ASII) with ownership of 44.56 percent each, while the remaining 10.88 percent is owned by the public.
In purchases in 2004 and 2006, Standard Chartered and Astra jointly bought a total of 89 percent of Permata for $548 million. Apart from owning some stake in Bank Permata, the U.K’s bank also has local a local branch operating in Indonesia.
Last year, the CEO of Standard Chartered Bill Winters was quoted by the Financial Times said that the lender is mulling some options to run its Indonesia operations, one of which is by selling one of its lenders in the country.
Winters has identified three options for resolving the UK-listed bank’s unsatisfactory position in Indonesia. The British-based emerging markets bank wants to end up with only one Indonesian entity by next year.
Winters said that StanChart could sell one or the other of its two operations in Indonesia and invest the proceeds in the other, or acquire control of Bank Permata and merge the two entities.
StanChart has incurred heavy losses in the country from writing off large exposures to heavily indebted clients, such as Indonesian businessman Samin Tan, the owner of PT Borneo Lumbung Energy Tbk (IDX: BORN) with total amount $1 billion.
The situation is increasingly urgent as Permata slumped to a loss last year after a big increase in loan loss provisions in the fourth quarter pushed bad debts up to 14 per cent of its total loan book. This resulted in a $215m loss for StanChart.
Bank Permata is the result of a merger five banks, PT Bank Bali Tbk, PT Bank Universal Tbk, PT Bank Prima Express, PT Bank Artamedia and PT Bank Patriot in 2002. The bank with branded name PermataBank, has aspirations to become a leading financial services provider indonesia, with a focus on consumer and commercial segment.
Throughout 2017, PermataBank posted a net profit of Rp748 billion (US$54.60 million) after it recorded a net loss of 2016 that reached Rp6.48 trillion. The bank had Rp165.5 trillion in total assets at the end of Dec. 2017 and has more than 330 branches.
Last year, the Financial Services Authority (FSA) has issued a regulation on Financial Holding Companies that requires financial conglomerates to have holding companies.
This regulation, which concerns the establishment of financial holding companies and amendment to definition of financial conglomerates, marks an effort to complement and strengthen policies of integrated supervision on financial conglomerates, based on feedback from the financial services industry and results of the researches conducted on prevailing practices in several countries.
The financial holding company can be one of the financial services companies under a financial conglomerate. Alternatively, the financial holding company can also be an existing or a newly established non-financial services company entity.
Some countries, like Malaysia, Korea, and Singapura have imposed regulations on Financial Holding Companies. The presence of special holding companies for the financial services sector makes it possible for a financial holding company to consolidate and control all of the financial conglomerate’s activities.
Moreover, it will smooth the way for a financial conglomerate’s coordination in relation to risk management, governance and integrated capitalization implementation, compared to the European Union concept.
In compliance with FSA Regulation No. 17/POJK.03/2014 on Implementation of Integrated Risk Management for Financial Conglomerates, the financial services companies found in the same group due to interlinked ownership and/or management are considered as a financial conglomerate.
Based on the new criteria, currently there are 48 financial conglomerates with total assets amounted to Rp5,919 trillion (as of Dec. 31, 2016), which represents 67.6 percent of the financial services sector’s overall assets.
Furthermore, the agency will impose additional capital for systemically important banks based on their size, interconnectedness with the financial system, and the complexity of their business to protect against any failures.
FSA told the country’s systemically important banks to create a tier-1 capital surcharge of between 1 per cent and 3.5 per cent of risk-weighted assets, depending on the size and perceived riskiness of the lender, the regulator said in a statement on its website Tuesday. Banks have until Jan. 1 to meet the additional requirement, it said.
The “capital surcharges” are in addition to capital adequacy ratio (CAR) requirement, which is set at a minimum of 8 percent of risk-weighted assets. The FSA may impose an additional 1 per cent surcharge if a bank is found to be even more systemically important than FSA’s current classification.
The regulation is part of Indonesia’s move to fully adopt Basel III, a global regulatory framework for banks’ capital adequacy norms, the FSA said. The methodology used to identify systemically important banks will be revised at least once every three years, the authority added.