SINGAPORE/LONDON (May 26): HSBC Holdings plc has been examining an initial public offering (IPO) of its Indonesian business to tap buoyant investor demand in the world's fourth-most populous country.

Plans for a share sale in Jakarta are at an advanced stage, said people familiar with the plan, asking not to be named discussing an internal matter. It has yet to file a formal IPO application but the local regulator is aware of its intention, they said. A spokesman for HSBC declined to comment. A spokesperson at Indonesia's Financial Services Authority said the regulator does not comment on corporate actions.

The plan would meet a promise by the regulator to eventually have HSBC relist the Indonesian business after it moved in 2015 to fully integrate the lender once known as PT Bank Ekonomi Raharja. Indonesia's watchdog said at the time that this process would likely take several years.

HSBC is in the midst of a pivot to Asia, shifting billions of dollars in capital and making fresh investments as it sells off and scales back unprofitable businesses in other regions. The bank is also fending off a push by its largest shareholder — China's Ping An Insurance Group Co — to spin off the Asian operations in a bid to improve returns.

Indonesia's economy has been gathering pace after emerging relatively unscathed from its latest virus wave, with the government predicting economic growth of 4.8% to 5.5% this year. Shopping malls and restaurants are full and the digital economy is gaining traction across the nation of more than 270 million people. In January, the value of electronic transactions surged 67% from a year ago, while digital banking activity climbed 63%.

HSBC initially bought 88.9% of PT Bank Ekonomi Raharja for US$607.5 million in 2008, a move that almost doubled its branch network across Indonesia. HSBC's Indonesian business, which has more than 3,000 employees, booked a profit before tax of about US$129 million in 2021, according to company reports. In 2020, it had 69 branches in 24 cities, it said in its annual report. HSBC offers services in commercial banking, investment banking, wealth, and personal banking.

Big listings

Indonesia has seen some of Southeast Asia's most high profile listings this year, including GoTo Group, the nation's biggest tech company. While the Jakarta Composite Index has slumped since hitting a record in mid-March, the benchmark is still up almost 5% this year, making it the best-performing major benchmark in Asia. Southeast Asian stocks have gained a broader following as US, European, and Chinese markets have been dragged down this year amid mounting economic and political risks.

Companies have raised about US$1.2 billion via first-time share sales in Indonesia so far this year, a leap from the US$161 million raised in the same period in 2021, according to data compiled by Bloomberg.

The biggest companies on the Indonesian exchange are PT Bank Central Asia and PT Bank Rakyat Indonesia. Bank Central Asia's profits climbed 16% last year and the lender is targeting loan growth of 6% to 8% this year.

HSBC operates across 64 countries and regions including China, Singapore, India, and Malaysia. Asia, where approximately half of its 220,000 employees are based, contributed to about 65% of the group's reported profit before tax in 2021.