JAKARTA, April 17 (Reuters) - Indonesian state-owned lender PT Bank Mandiri will buy PT Bank Tabungan Negara (BTN) to ensure the smaller state-owned peer keeps up with demand for mortgages, a government minister said on Thursday.
The acquisition will also make Indonesia's biggest bank by assets become more regionally competitive, State-Owned Enterprises Minister Dahlan Iskan told reporters on the sidelines of a ministry meeting.
Bank Mandiri lends mainly to companies whereas BTN focuses on loans for subsidised housing. The government wants more Indonesians - particularly those on low and mid-range incomes - to have access to housing loans, analysts said.
"BTN's capacity right now cannot support the need of 1.5 million houses per year, so there's a need of a large horse," Iskan said. "BTN will be a subsidiary of Mandiri, but BTN will not disappear."
Speculation around the acquisition pushed up the price of BTN shares by as much as 20 percent on Wednesday. On Thursday, the shares were down 0.4 percent, while those of Bank Mandiri fell 1.3 percent and the benchmark index rose 0.4 percent.
"God willing this (the acquisition) will happen. It is important for Indonesia to have competitive banks," Bank Mandiri Chief Executive Budi Gunadi Sadikin told Reuters in a text message. "We will follow up with the decision of shareholders."
BTN President Director Maryono told reporters on the sidelines of another ministerial meeting on Tuesday that the bank will hold a shareholder meeting on May 21 to vote on the proposed acquisition.
Any deal would continue a trend of banking consolidation in Indonesia. South Korea's Woori Bank in January bought 33 percent of PT Bank Himpunan Saudara, and Japan's Sumitomo Mitsui Banking Corp last year agreed to buy up to 40 percent of Bank Tabungan Pensiunan Nasional. (Reporting by Fathiyah Dahrul; Writing by Eveline Danubrata; Editing by Christopher Cushing)