StanChart, BBVA eye Indonesia bank stake

HONG KONG: Standard Chartered and Spain's BBVA are among the banks showing interest in the sale of the Gunawan family's $1.4 billion stake in Indonesia's Panin Bank, sources with direct knowledge of the deal told.

The 46-per cent stake is on the block with UBS running the auction, sources have previously told Reuters. Reuters reported last month that Australia and New Zealand Banking Group Ltd, Australia's No. 4 lender, is viewed by sources involved with the process as the frontrunner to buy the stake, as it already owns a 38.5 per cent holding.

Shares in Panin, Indonesia's No. 7 lender, rose as much as 1.8 per cent to 1,100 rupiah after the Reuters report, outperforming a 1.1 per cent rise the benchmark index. The auction for the Indonesian banking asset is set to heat up with global names StanChart and BBVA joining the race. The main draw for the foreign banks is the fast growing Indonesian economy, which is expected to stoke credit growth.

"In the next 5 years, under a low interest rate environment and falling government bond yields, we see banks becoming more willing to lend expanding loan portfolios to 40 per cent of GDP," Deutsche Bank said in a recent report. Deutsche, which estimates the current loan to GDP ratio to be 26 per cent, is forecasting the Indonesian economy will double in the next five years. The acquisition is unlikely to come cheap with the winner expected to pay between 3.5-4 times price to book value (P/BV) analysts say.

The most expensive bank deal in Indonesia was HSBC Holdings plc purchase of Bank Ekonomoi's in 2008, which was done at a P/BV of 4.6, according to Macquarie Research. StanChart, BBVA and ANZ declined to comment. Panin could not immediately be reached for comment. ANZ is being advised by Credit Suisse and Morgan Stanley. It was not clear which investment banks were advising the other lenders. Sources with direct knowledge of the matter said both ANZ and StanChart have submitted preliminary bids, though they declined to give the value.

"The IM (information memorandum) is out and the preliminary bids are going on now," one person with direct knowledge of the matter said. Sources declined to be identified as the talks were confidential.

Analysts say the bidders would have to pay top dollar to clinch the deal. "We expect the selling price of Panin to be above 3.5-4 times price to book value, given the significant size of the bank and the fact that it is one of better banking assets up for grabs in one of Asia's fastest growing markets," Ferry Wong, a research analyst with Macquarie Equities wrote in a recent report. Macquarie estimates the fair book value of Panin to be about 580 rupiah ($0.629) per share, and has a target price of 1,600 rupiah on Pani shares. Some analysts remain unsure if the deal will be done, especially since the owners of the stake have little need for the proceeds.

"Whether the Gunawan family will sell the bank is still questionable, given that they are not in need of cash," BNP Paribas analyst Tjandra Lienandjaja said in a report. "Unless the offer is too good to refuse (more than 4 times x latest price to book value), we believe it will be difficult for any prospective buyer to buy the bank," Lienandjaja said.