Indonesia

OCBC Expands Indonesian Market Presence with Strategic Acquisition

OCBC is set to enhance its footprint in Indonesia by acquiring PT Bank Commonwealth (PTBC) from the Commonwealth Bank of Australia (CBA) for an initial cash payment of approximately S$191 million (A$220 million).

This move, announced on November 16, 2023, will see OCBC Indonesia, also known as PT Bank OCBC NISP, taking over 99% of PTBC's shares. The purchase, valued at around 0.7 times the forecasted FY23 price-to-book value, will be financed through OCBC's internal funds, pending approval from Indonesia's Financial Services Authority and the approval of OCBC's shareholders at the Annual General Meeting.

The integration of PTBC into OCBC Indonesia is expected to finalize in the second or third quarter of 2024. This acquisition aligns with CBA's strategy to concentrate on its main banking operations in Australia and New Zealand, while OCBC Indonesia plans to also acquire the remaining 1% stake in PTBC from local shareholders subsequently.

As of September 30, 2023, PTBC, despite facing losses since 2020 due to dwindling customer numbers, boasts over 1.2 million clients and offers services that complement OCBC Indonesia's existing portfolio, including wealth management and auto financing. PTBC's assets stand at approximately S$1.4 billion, with a Common Equity Tier 1 (CET1) ratio of 38.4%, and equal amounts in gross loans and total deposits of S$735 million.

PTBC has improved its gross non-performing loan (NPL) ratio to about 1.95% from 5.1% in FY20, aided by a Standby Letter of Credit from CBA as part of a Debt Relaxation Programme. It operates 30 branches, 30 e-kiosks, and 74 ATMs across 23 major Indonesian cities.

In terms of OCBC Indonesia's market position, it ranks as the fourth largest private sector bank by assets, totaling around S$21.4 billion as of August 31, 2023. Although PTBC is smaller in comparison, its acquisition is expected to increase OCBC Indonesia's scale. Nonetheless, asset quality improvements and cost efficiency measures are anticipated before PTBC's full integration. The deal is not expected to significantly affect the OCBC Group's net tangible assets, earnings per share, or capital standing for the forecasted fiscal year 2023.