Analysts have applauded Indonesia's PT Bank Danamon's sale of its entire 25% stake in local joint-venture securities firm PT DBS Vickers Securities Indonesia to a number of financial institutions for Rp25.7 billion ($2.7 million) last week.
"Proceeds from the divestment will boost earnings and debt service capability, as well as impart upside risk to our full-year forecast," says Brett Williams, a Singapore-based analyst at ING. "We interpret the sale, as we did for the divestment in PT Korea Exchange Bank in August, as a commitment to and strategic focus on its core domestic lending franchise."
Indeed, that is precisely what Bank Danamon President Sebastian Paredes pointed out last Tuesday, saying in a statement that ""Bank Danamon continues to focus on its core business strategy."
"As a minority shareholder of DBS Vickers Securities with no influence over strategic business plans and operational policy in the company, we decided to divest our entire ownership," he added.
After the stake sale, DBS Vickers Securities Holdings Pte. Ltd, Singapore will own an 85% stake in DBS Indonesia, while the remaining 14% will be held by DBS Vickers Securities Singapore Pte. Ltd and 1% by investment company PT Saratoga Sentra Business.
Analysts say concentration on the domestic lending business, along with more profitable treasury operations, should sustain the bank's strong operating performance. Willams adds that from the high-growth, high-margin lending portfolio of its Adira Finance unit, the annualised net interest margin of 9.0% in September demonstrates the bank's capability of repricing its balance sheet profitably in a rising rates cycle.
Bank Danamon, the nation's fifth-largest bank by assets, is 62% owned by a consortium of Deutsche Bank and Singapore Temasek Holding Pte Ltd and 10.5% by the government.
