M&A: Malaysia's Maybank on a buying spree

Last week, Maybank, Malaysia's largest bank, said it had agreed terms to purchase 15% of Vietnam's An Binh Bank for just over USD125 million, giving it a foothold in a market that many expect to be a rapidly rising star in the East.

Then yesterday it surprised markets by announcing plans to purchase a company called Sorak Financial Holdings Pte Limited, a Singaporean company.

Sorak is owned by Asia Financial Holdings, a subsidiary (via Fullerton Financial Holdings) of the Singapore government's investment company Temasek Holdings Pte Limited with a 25% shareholding with Kookmin Bank of Korea.

The purchase will give Maybank a 55.7% holding in the Indonesian bank PT Bank International Indonesia Tbk, or BII. The remainder of the shares, which Maybank says it will make, in due course, a tender offer to purchase the remaining shares which are held by Kookmin Bank of Korea Barclays Bank of the UK and Malaysia's ICB Financial Group Holdings, Aranda Investments (Pte) Limited of Mauritius, the Government of Indonesia and a public stake of 31.7%. (2006 figures)

In 2006, the International Finance Corporation said that BII was Indonesia's sixth biggest bank with over 7000 employees, 250 branches and 700 ATMs across Indonesia. At that time, BII received medium term loans of USD125 million from IFC to provide loans to small and medium enterprises in Indonesia.

The Maybank offer places a value of approaching USD1.5 milliard on BII, far in excess of its current market price.

BII makes a profit, but that has been declining for the past three years.

Maybank is currently South East Asia's fourth biggest bank but it has been cautious in its foreign investments, losing out to more aggressive rivals. Domestically, that includes CIMB which snapped up Bank Niaga, Indonesia's biggest bank.

Announcing the plan, Maybank's acting CEO Datuk Aminuddin Md Desa said that profit margins in Indonesia are the best in the region and the price reflected not just the scarcity of Indonesian banks available for purchase but also competition. This is understood to have been from several foreign banks including HSBC, Bank of China and others rumoured to be Standard Chartered (which has been buying aggressively around the region for several years) and at least one Japanese bank.

Aminuddin sees considerable opportunity for growth in loans pointing out that on some measures, Indonesian loans relative to GDP are a third of those in Thailand and a quarter of those in Malaysia.

Margins are higher, too, he said with interest rates of 5.8% - much higher than the Philippines (3.9%) and Malaysia (2.3%).

He did not mention the property market in Indonesia which is vast and incredibly diverse with city-centre properties in Jakarta amongst the most expensive in the region.

Nor did he mention that Singapore's massive private banking growth was kicked off by capital moving from Indonesia. Putting a Malaysian bank's footprint across Indonesia will give it access to that capital, as it has done for CIMB which has gone on to develop successful securities and investment banking divisions in Indonesia.

Maybank's smaller rival, AmBank - part owned by ANZ - is also quietly building up a significant presence in Jakarta's investment community.