December 25, 2017 / 3:06 PM / 10 months ago

Japan's SMFG keen to raise stake in Indonesian bank BTPN to majority

TOKYO (Reuters) - Sumitomo Mitsui Financial Group (SMFG) is keen to raise its stake to a majority in Indonesian lender BTPN if authorities permit, the Japanese bank’s CEO said, as it aims to roll out full-scale banking operations in emerging Asia markets.

FILE PHOTO: Sumitomo Mitsui Financial Group (SMFG)'s CEO Takeshi Kunibe speaks at an interview with Reuters in Tokyo, Japan, May 23, 2017. REUTERS/Kim Kyung-Hoon/File Photo

“Conditional upon regulatory approval, we would like to raise our stake and hold a majority in the future,” Takeshi Kunibe told Reuters in an interview.

Japan’s second-largest bank by market capitalization spent a total of about 150 billion yen ($1.32 billion) in 2013 and 2014 to buy 40 percent of mid-sized lender PT Bank Tabungan Pensiunan Nasional Tbk (BTPN).

Indonesian laws restrict share ownership in the country’s banks by a single entity to 40 percent. However, approvals for a majority stake may be granted on a case-by-case basis.

Kunibe declined to specify if his bank is talking to Indonesian authorities about any planned stake increase in BTPN, and to give any other details, saying he could not discuss the matter since BTPN is a listed company. It was not immediately clear whether Indonesian authorities would view any such proposal from SMFG favorably or not.

Japanese and other Asian banks are increasingly targeting a presence in Indonesia in the hopes of tapping an emerging middle class in Southeast Asia’s largest economy with population of over 250 million.

South Korean Shinhan Bank acquired a majority stake in Bank Metro Ekspress in 2015, while China Construction Bank entered the Indonesian market by acquiring Bank Windu in 2016.

Japan’s largest lender Mitsubishi UFJ Financial Group (MUFG) is interested in buying a stake in Bank Danamon Indonesia, Indonesia’s financial services authority (OJK) confirmed in November. [nS9N1EW01N]

FILE PHOTO: Sumitomo Mitsui Financial Group (SMFG)'s CEO Takeshi Kunibe speaks at an interview with Reuters in Tokyo, Japan, May 23, 2017. REUTERS/Kim Kyung-Hoon/File Photo

Singapore’s DBS Group Holdings had sought to buy a controlling stake in Danamon in 2013, but dropped the bid after Indonesia changed laws to restrict single ownership in banks to 40 percent.

However, Indonesia can relax these curbs on special grounds, including if the investing bank is financially strong. [nL3N1NF1CU]

Kunibe, who became chief of SMFG in April, said his bank aims to have full-service banks in Asia outside its home market.

“We have already been doing wholesale business in many countries and we want to build retail business where the middle class population is expected to grow,” he said.

The bank has been looking for opportunities to acquire commercial banks in Asia outside Japan, Kunibe said but added his focus for now is to grow the business in Indonesia and Vietnam, where it owns a 15 percent stake in Eximbank.

SMFG and rival banks face persistently low interest rates at home and stricter capital rules globally, adding pressure on them to seek growth drivers.

Kunibe said his bank is now studying newly finalised global capital rules to see how much it can pay back to shareholders and how much it can spend on growth. He said he is likely to discuss its capital policy, including shareholder returns, when the bank announces full-year results in May. [nF9N1M801L]

BTPN, which provides loans to pensioners and micro finance to small business owners, had a net profit of 1.367 trillion rupiah ($100.85 million) for Jan-Sept on assets of 93.788 trillion rupiah.

($1 = 113.5300 yen)

($1 = 13,555.0000 rupiah)

Reporting by Taiga Uranaka and Taro Fuse; Editing by Muralikumar Anantharaman

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