Bank Danamon outlines $335 million rights issue

Indonesia's Bank Danamon yesterday announced details of a Rp4 trillion ($335 million) rights issue that had been widely anticipated by the market, joining a series of Asian banks seeking to add fresh equity capital to their balance sheets.

Danamon, which ranks as Indonesia's fifth largest commercial bank in terms of assets, is already one of the most well-capitalised banks in Asia with a capital adequacy ratio of 15.4% and a tier-1 ratio of 13.8%, but the bank said it is keen to strengthen this further to enhance its lending capacity within its key focus areas of microfinance and small- and medium-sized enterprises.

"In this financially turbulent time, it is prudent to be well capitalised," Bank Danamon's president director, Sebastian Paredes, noted in a written statement. "Our enhanced capital position and balance sheet will enable us to better meet any unforeseen developments. At the same time we will be able to take advantage of opportunities that may arise."

A deal from Bank Danamon had been expected for some time, and one reason for this is that the bank is 67.9%-owned by Singapore investment company Temasek through a subsidiary called Asia Financial (Indonesia). Temasek has been very active in recent months in terms of ensuring that the financial and real estate companies in its portfolio have adequate capital to face what is expected to be another challenging year head.