The announcement today that Singapore’s DBS will take a controlling stake in Indonesia’s Bank Danamon is the strongest indication yet of the changing landscape of banking in Southeast Asia.
Banks such as DBS and Malaysia’s CIMB are determined to build on their strong bases in domestic markets and become regional players.
DBS will buy a 67% controlling stake in Danamon that is currently owned by the Singaporean state investment agency, Temasek – which is also a leading shareholder in DBS.
DBS will pay a hefty 56% premium to the current Danamon share price in a deal valuing the target at $4.9 billion.
DBS will consider this price worth paying if it helps the bank achieve CEO Piyush Gupta’s vision of becoming “the Asian bank of choice for the new Asia”.
As well making DBS one of the top five overall banks in Indonesia, the purchase should give the Singaporean bank access to one of the fasted-growing investment banking markets in Asia.
As Clifford Lee, DBS’s head of fixed income, told Euromoney in January: “We were born in this region, we’ve invested in it for a long time…The competition is harsh but we just have to psych ourselves accordingly to take them on.”
DBS’s move follows CIMB’s decision to buy RBS’s advisory and equity business in Asia last month.
As Euromoney says in its editorial this month: “If this transaction goes through, it is transformational, not just for CIMB but for the reach of emerging market banks.”
Charon Wardini Mokkhzani, deputy CEO of CIMB, told Euromoney in January: “Because we are positioning ourselves as an Asean regional bank, we can give regional solutions to clients. It’s surprising the number of Southeast Asian companies that are investing elsewhere in Asia. There’s a lot of interest in regional investment flows.”
With DBS’s takeover of Danomon, perhaps it is time to move financial assets to the top of the list of interest.
DBS is being advised on the deal by Morgan Stanley and Credit Suisse. Danamon is advised by Citigroup.
