UPDATE 1-Indonesia's Niaga, Lippo shares down after merger plan
(Adds details, analyst quotes)
JAKARTA, Dec 28 (Reuters) - Shares of Indonesia's PT Bank Niaga (BNGA.JK) and Bank Lippo LPBN.JK edged down in early trade on Friday in line with falls in the broader market and after the announcement of a plan to merge both banks.
Analysts said the price falls in both Niaga and Lippo are likely to be temporary as the move is expected to create the country's sixth-largest lender combining Lippo's strength in deposit collection and Niaga's strength in loan expansion.
Niaga dropped 1.1 percent to 880 rupiah in early trade on Friday, while Lippo shares also fell 1.1 percent to 2,250 rupiah. The broader market .JKSE was down around 1 percent.
"Lippo is strong in deposit collection, while Niaga is good at loan expansion," said analyst Made Suardhini of Brokerage Mandiri Sekuritas, referring to Lippo's strength in attracting low cost deposits such as saving accounts.
"In regards to the loan markets, they are not really competing head to head. Niaga is strong at consumer and corporate loan market, while Lippo tends to focus more on commercial loans. If both banks merge, they will complement each other."
Lippo said late on Thursday that Malaysian state investment arm Khazanah Nasional Bhd, which controls both banks, planned to merge the banks to meet Indonesia's central bank's regulations limiting onwership to no more than one bank.
The merger plan is subject to regulatory approvals.
The merger of the two banks is in line with Indonesian central bank plans to consolidate the country's 130 banks which have total assets of around $200 billion through mergers and acquisitions.
If the merger between Lippo and Niaga goes ahead, it would create a bank with combined assets of 85.6 trillion rupiah ($9.11 billion) based on financial results as of September.
Khazanah indirectly owns a 93 percent stake in Lippo through Santubong Investment BV and Greatville Pte Ltd and it also has an indirect 64 percent share in Niaga through Bumiputra-Commerce Holdings Bhd. (Reporting by Muhamad Al Azhari, editing by Sugita Katyal)
