Maybank-BII Marriage with Unusual High Dowry...

Maybank chiefs to come under scrutiny
By John Aglionby in Jakarta

Malayan Banking’s (Maybank) bosses can expect to come under scrutiny for completing its purchase of Bank Internasional Indonesia (BII) despite securing a discount on the price agreed six months ago.

Maybank on Tuesday bought 55.7 per cent of Indonesia’s eighth largest bank from Sorak Financial Holdings for $1.24bn, a 15 per cent rebate on the original $1.5bn deal. The Malaysian lender will now make a tender offer for the remaining shares at the originally agreed Rp510, or $1.2bn for all of them.

Considering BII’s shares closed at Rp310 last Friday, the numerous analysts who say Malaysia’s largest bank has paid far too much for a mediocrely performing bank appear to have strong grounds for criticism.

But as he announced the deal late on Tuesday, Abdul Wahid Omar, Maybank’s president and chief executive, claimed he was “happy” with the price. He said the BII deal would enable Maybank to expand into what he describes as a “key market”.

While Maybank’s shareholders will have to wait a long time to see returns on their BII investment, the Malaysian bank is one of a slew of foreign competitors eyeing south-east Asia’s largest economy.

Last month Barclays bought the whole of Bank Akita, which has only 10 branches and assets of $100m compared with BII’s 230 branches and assets of $6bn.

And in the last two years foreign buyers of Indonesian banks have included Mitsubishi, Texas Pacific Group, the Industrial and Commercial Bank of China, Commonwealth Bank of Australia and Rabobank of the Netherlands.

“Maybank’s certainly gone out on a limb in the amount it’s paid to get into the market,” one Jakarta-based foreign banker said. “But it’s in very good company in wanting to be here.”

Barclays said the Akita acquisition was part of its strategy to “expand into emerging markets with good growth characteristics”.

Analysts consider Indonesia’s “good growth characteristics” to be many and varied. Unlike five years ago Indonesia is now considered politically stable when compared to neighbouring Malaysia and Thailand. Next year’s legislative and presidential elections in Indonesia are expected to be keenly fought but contested within the rules.

Indonesia’s economy, while undoubtedly underperforming and heavily reliant on commodities such as coal and palm oil, is regarded as being built on sound fundamentals.

The International Monetary Fund, in its annual assessment in July, said the economy was relatively unscathed by the global economic turmoil.

Of more significance to Maybank and its competitors, the IMF said the banking sector is proving largely “resilient to macroeconomic shocks and exchange rate risks”.

Furthermore, well under half the Indonesian population and little more than a quarter of the small and medium enterprises use the formal banking sector, meaning there is plenty of room for growth.

Numerous banks, including HSBC and Citigroup, have started seeking out these markets by establishing services offering unsecured micro-loans.

“With the economy growing at 6.3 per cent in the first half of the year, Indonesia’s potential new customer base is growing all the time,” the foreign banker said. “It really is a land of opportunity.”

Reported in The Financial Times

The manner of which Maybank went into this deal is enough to raise suspicion among the locals. Being a government owned public listed entity, the failure by the government to call for an investigation into the dubious nature of this bid is indicative of its collaboration in the scandal behind this very deal. Again, there are benefactors at the expense of the minority shareholders.

With this deal, this management has lost its credibility and Maybank has turned into any other previous government owned busted banks like Bank Bumiputra. Sell Maybank shares as one can expect more scandals to arise in the near future.

Ill intention right from the beginning. Perhaps, Temasek can help shed some light.