Piyush Gupta, DBS chief executive officer, is sharp, speaks fast and since he took over the reins three years ago, has wasted no time in reshaping the bank’s franchise.
But now Gupta is engaged in a high-stakes poker game as he seeks to buy Bank Danamon, Indonesia’s sixth-largest lender by assets. The prize: turbo-charged growth.
Gupta is ebullient about the opportunities the deal can bring to DBS. “I’m a big believer in Indonesia,” said Gupta in an interview with FinanceAsia in Singapore. “What an inorganic deal like Danamon allows us to do is accelerate the process of growth.”
DBS is the biggest lender in Singapore, but has lacked a meaningful Asean presence compared to its peers UOB and OCBC. In contrast, DBS’s overseas presence has mostly been in Hong Kong and Greater China, as well as India. However, the bank has ambitious plans to seize market share in Indonesia.
In April last year, it agreed to buy Temasek Holdings’ 67.4% stake in Bank Danamon for $4.9 billion, which would then trigger a mandatory takeover offer for the rest of the shares. However, the deal was delayed after Indonesian authorities moved to limit foreign ownership in its banks.
In May, news reports quoted Bank Indonesia’s governor Darmin Nasution saying that DBS can buy a 40% stake in Danamon, but that it would only be allowed a further stake if Singapore showed “reciprocity” by allowing Indonesia’s banks to open more branches there.
DBS responded in a statement to the Singapore Exchange, saying that it had not received official written notification of the approval and that it “hopes the application will be approved as originally submitted”.
Gupta brusquely refused to say if DBS will walk away if it is unable to get a majority stake. However, the bank has long indicated that it is not keen on minority stakes — which do not offer control and require capital to be set aside under Basel III rules.
One possibility is that Gupta could take the 40% that is already on the table and hope to buy more in the future.
“The ball is back in his court,” said one person familiar with the negotiations.
DBS has until August 1 to decide if it will go ahead with the acquisition, after which the agreement will lapse unless both parties mutually agree to a further extension.
Despite the uncertainties, Gupta says he is “hopeful” of the bank’s prospects for the deal, as well as for the Indonesian market — where he sees tremendous opportunity to replicate the universal bank strategy that DBS has in place in Singapore, and which it is building across the region.
“We want to be an Asia-centric commercial bank — with a presence in China and Hong Kong,” said Gupta. “We also have a meaningful Southeast Asian presence in Singapore and Indonesia, and would love to add Malaysia.”
To read the full story, see the latest issue of FinanceAsia magazine, which is available to subscribers online
