Affin joins queue for Indonesia

Affin joins queue for Indonesia
By Chong Pooi KoonPublished: 2010/01/19

Affin has set its sights on Indonesia as its first overseas venture but garnered little attention from banking analysts

AFFIN Holdings Bhd (5185) may become the fourth Malaysian bank to buy an Indonesian lender, reflecting vast untapped opportunities in Southeast Asia's most populous nation.

Still, the lack of information available on the bank that it is buying coupled with Affin's previous track record of poor asset quality has led to lukewarm response from stock analysts.

Shares of Affin rose 3.2 per cent to RM2.55 yesterday. A total of 1.5 million shares were traded.

Affin, owner of the second smallest among nine banks in Malaysia, said last Friday that it had Bank Negara Malaysia's green light to enter talks to buy a controlling stake in Indonesia's PT Bank Ina Perdana.

Affin said it has set its sights on Indonesia as its first overseas venture due to the country's big population and low banking penetration, but gave no further details on Bank Ina Perdana.

The announcement garnered little attention from banking analysts, most of whom do not track Affin's stock.

"It is a natural progression to move out since the domestic market is already crowded. But it is probably a very small lender that it's buying. There's no information available out there on Bank Ina Perdana," an analyst who has a "buy" call on Affin said.

The industry is fragmented in Indonesia, which has 121 commercial banks even after consolidation pushed by its central bank in recent years. Apart from the top 10 banks, other lenders are mostly very small with limited branches.

"From a partial list that I have, which ranks Indonesian banks by asset size, I can't find this bank even down to the rank of 91," the analyst, who asked not to be named, said, adding that a smaller target is probably easier for Affin to manage.

Affin has about RM700 million excess cash that it can spend, according to the analyst, sufficient to buy a bank with up to RM450 million in assets.

According to the central bank website, Bank Ina Perdana had total assets of RM314 million as at the end of September last year. It made a profit after tax of RM4.3 million in the nine months to September 30 2009, but its retained earnings were in deficit of RM6.4 million.

The bank, which has no website, operates seven branches - five in Surabaya and two in Jakarta - according to unofficial information.

A fast-growth economy, population of 230 million, and banking market still dominated by basic products means that prospects are bright for the industry, and banks in Indonesia have been a highly sought-after asset.

Global banks, including HSBC, have scrambled to get a slice of the market there, while Malaysia's top lenders - Malayan Banking Bhd, CIMB Group Holdings Bhd and RHB Capital Bhd - have all scooped up assets there.

Last year, the Indonesian economy fared better than most others in the region during the economic slump when countries like Malaysia and Singapore slipped into recession.

Indonesia's US$514 billion (RM1.7 trillion) economy is estimated to have expanded 4.3 per cent last year, and projected to grow as much as 5.5 per cent this year, according to its government. President Susilo Bambang Yudhoyono said earlier this month that it was targeting an average of 6.6 per cent annual growth over the next five years.