AS DBS Group readies for a longer‐than‐expected wait for regulatory approval for its proposed takeover of PT Bank Danamon Indonesia, senior officials at the Singapore lender said foreign capital was sorely needed to spur consolidation and expand lending to the country's rapidly emerging middle class.

A year after first offering to buy Indonesia's sixth‐ largest bank for US$6.77 billion, Singapore's biggest lender extended its deadline for regulatory approval by two months this week. Indonesia's central bank isstill assessing the deal, while ramping up political pressure for more access to neighbouring markets, including Singapore's, for its own banks.

DBS is the world's 58th largest bank in terms of the value of its retained earnings and common stock, which totalled US$21 billion in 2012, a survey published by The Banker showed. Bank Mandiri, Indonesia's largest bank, with US$5 billion of core capital, is ranked number 181. The takeover would see Singapore's Temasek Holdings sell its 67 per cent stake in Danamon to DBS, who will then buy the remaining shares it does not already own on the open market for 7,000 rupiah (S$0.89) each.

Bank Indonesia hassaid it aims to shrink the number of banks to 80 from roughly 120 in the coming years. In 2008, Malaysian sovereign wealth fund Khazanah Nasional merged its Lippo Bank and Bank Niaga to formCIMB‐Niaga,making itthe sixth‐largestl ender then. At stake is access to the country's newly emerging middle class. Some 6 million people out of a population of more than 240 million leave the ranks of the poor every year as growth rates of more than 6 per cent a yeartrigger a rise in minimum wages. "Thisis one of the
world's most under banked and most profitable markets," StanChart's MrIchsan says.

Source: AmFraser