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Business deals

Top Indonesian lender BCA buys Rabobank local unit for $28m

Bank Central Asia deal deepens consolidation of country's financial sector

The Bank Central Asia tower in Jakarta: BCA also finalized its purchase of Bank Royal Indonesia at the end of October.   © Reuters

JAKARTA -- Indonesia's largest private lender, Bank Central Asia, agreed on Dec. 11 to acquire the local unit of Dutch company Rabobank, its second purchase of a financial institution this year and the latest consolidation affecting the Southeast Asian country's banking industry.

BCA, through subsidiary BCA Finance, signed a deal to buy all of Rabobank Indonesia for an estimated 397 billion rupiah ($28.3 million). Rabobank said earlier this year that it planned to quit Indonesia.

The acquisition is intended to "support the development of BCA subsidiaries' existing businesses," the bank reported in a stock filing, noting that a merger between Rabobank Indonesia and at least one other BCA subsidiary is under consideration.

The deal comes amid an acceleration in banking mergers and acquisitions in a country where expansion by regional players has put local institutions on the defensive, and as the sector faces growing competition from branchless fintech startups.

The purchase is subject to approval by Indonesia's Financial Services Authority, known by the acronym OJK.

BCA finalized its purchase of small local lender Bank Royal Indonesia at the end of October. Jahja Setiaatmadja, BCA's president director, said earlier this year that the Bank Royal purchase was intended to support his company's digitization moves as financial technologies fuel rapid growth of digital banking in Indonesia.

Setiaatmadja also had said consolidation was more important than ever as banks in the region compete to expand further into Southeast Asia's largest economy. Indonesia has relaxed regulations governing foreign ownership in local banks as Jakarta urges consolidation of the national banking industry, though a plan to consolidate all state-owned lenders under one holding has not progressed.

State-owned Bank Mandiri, Indonesia's second-largest lender by assets, also has expressed a desire to acquire a smaller local bank.

Meanwhile, the plan by Standard Chartered and top Indonesian conglomerate Astra International to divest Bank Permata, a midsize local lender, has attracted a number of potential bidders. They reportedly include Bank Mandiri, CT Corp. -- controlled by local tycoon Chairul Tanjung -- and Singaporean institutions Oversea-Chinese Banking Corp. and DBS.

A senior OJK official said last month that Japan's Sumitomo Mitsui Banking Corp. and an undisclosed Thai investor are two final contenders to acquire Permata.

Indonesia's banking consolidation has intensified this year. SMBC, part of Sumitomo Mitsui Financial Group, completed the merger of its Indonesian unit with local lender Bank BTPN and now controls 97% of the country's 10th-largest bank by assets. Another Japanese megabank, Mitsubishi UFJ Financial Group, in April raised its stake in Bank Danamon Indonesia and made it a consolidated subsidiary.

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