* SMBC paying about 4.5 times price-to-book ratio
* TPG initially paid $195 mln for 71.6 pct stake in 2008
* Indonesia among most underdeveloped Asia bank markets
* BTPN shares have risen a almost 12 times since early 2008
By Taiga Uranaka and Denny Thomas
TOKYO/HONG KONG, May 9 Sumitomo Mitsui Financial
Group's deal to buy a $1.5 billion stake in Indonesia's
BTPN at high valuations marks the beginning of an
aggressive push by cash-rich Japanese lenders into retail
banking in other Asian markets.
Indonesia is Southeast Asia's biggest economy but has one of
Asia's most underdeveloped banking markets, giving it great
allure for foreign investors even if regulatory worries have
impeded some deals.
Japanese banks, in particular, are increasingly trying to
build up a large retail client base globally. They are seeking
access to local-currency savings to fund growth in overseas
loans, hoping to counterbalance sluggish growth at home, banking
The agreement by SMFG's core banking unit, Sumitomo Mitsui
Banking Corp, to buy 40 percent of Bank Tabungan Pensiunan
Nasional Tbk PT (BTPN), Indonesia's seventh-biggest bank by
market value, also puts private equity owner TPG Capital
on course for another bumper return from an Asian bank
At a price-to-book ratio of about 4.5 based on Reuters
calculations, it is one of the most expensive bank deals ever in
Asia. BTPN also ranks as the world's sixth-most expensive lender
measured by price-to-book ratio among global banks with a market
value of $1 billion or above, according to Thomson Reuters data.
Galvanised by TPG's investment, BTPN stock has risen
twelvefold since early 2008, giving it a market value of $3.4
The deal is set to be Japan's second-biggest outbound M&A in
the banking sector, after Mitsubishi UFJ Financial Group's
(MUFG) $3.71 billion purchase of UnionBanCal Corp in
the United States in 2008.
SMFG, Japan's third-largest bank by assets, is buying a
well-capitalised outfit. BTPN's non-performing loans sit at 0.66
percent, compared with an Indonesian industry average of 1.56
percent, and it has a Tier 1 risk-adjusted capital ratio of
21.87 percent, almost double the industry average.
SMFG will first buy 24.26 percent of BTPN for 6,500 rupiah
per share, a 14 percent premium to BTPN's last traded price and
equivalent to 9.12 trillion rupiah ($937 million). It will then
raise its holding to 40 percent as long as it wins regulatory
"Some premiums must be paid for nearly 30 percent annual
growth rate of BTPN's profit and loan balances," said Toyoki
Sameshima, senior analyst at BNP Paribas Securities in Tokyo.
SMFG is buying most of those shares from TPG, which acquired
71.6 percent of BTPN in 2008. The private equity firm's stake
dropped after a rights offering in 2010 and it currently holds
TPG and its Indonesian affiliate North Star paid about $195
million for the stake in 2008, meaning that were TPG to offload
its entire holding in BTPN at the premium offered by SMFG it
would make a return of more than 10 times its initial
investment. TPG declined to comment on how it plans to sell its
remaining 25.29 percent stake in BTPN, valued at $860 million at
current market prices.
One of the biggest challenges Japanese banks face is a lack
of a retail network overseas.
Japan's biggest lender MUFG wants to acquire an Asian
commercial bank so it can kick-start local banking operations in
the region, its chief told Reuters in an interview last month.
Sources have told Reuters that MUFG is bidding for General
Electric's $1.8 billion stake in Thailand's Bank of Ayudhya
SMFG has also said it is looking at developing other types
of consumer finance in Southeast Asia, such as sales finance for
cars, air conditioners and TVs.
ROOM TO GROW
The appeal of Asia's expanding middle class and fast-growing
economies has spurred dealmaking and a raft of IPOs and
Indonesia, in particular, has ample room for new and
existing banks to ramp up growth.
Only about 40 percent of Indonesia's 240 million people have
bank accounts and most personal borrowing is done outside the
banking sector. It has more than 120 commercial lenders but most
of them are minnows unable to compete with the top 10 operations
which control 80 percent of total bank assets.
Still, SMBC's move surprised some as the Indonesian bank
regulator has yet to approve Singaporean bank DBS Group
Holdings' $7.2 billion deal to buy a controlling stake
in Indonesia's Bank Danamon.
Soon after DBS announced that deal in April 2012, the
Indonesian central bank announced new bank guidelines, which
capped bank ownership at 40 percent.
Established in 1958, BTPN started as a pensioners' savings
bank but now operates as a commercial bank, with more than
19,000 employees and over 1,900 branches.
BTPN shares did not trade on Thursday as Indonesian markets
were closed for a public holiday. SMFG's shares ended down 2
percent in afternoon trade, slightly underperforming a 1.6
percent decline in Tokyo banking stocks.