Indonesian banking giant PT Bank Mandiri (Persero) Tbk has shelved acquisition plans in the Philippines and made expansion in Malaysia a lower priority, a company executive said.
Bank Mandiri, which is Indonesia's biggest bank according to asset-size data from S&P Global Market Intelligence as of Sept. 30, 2017, and has offshore operations in Singapore, Hong Kong, Shanghai, London, Malaysia and the Cayman Islands, decided "not to pursue" any deals in the Philippines after conducting due diligence on two Philippine banks in 2017, Bret Ginesky, head of investor relations at the Jakarta-based bank, told S&P Global Market Intelligence.
Ginesky did not name the banks. He added that capital reallocation was why the deals were called off, although he declined to elaborate.
"We are pausing on [international] M&A. ... We will readdress these plans in the future," Ginesky said.
Bank Mandiri's overseas branches and offices mainly engage in wholesale banking, such as corporate finance, trade services and remittance. According to the bank's latest annual report from 2016, assets held by its overseas operations totaled 45.663 trillion Indonesian rupiah as of end-2016, or 4% of the entire bank's asset base of 1,038.706 trillion rupiah. Singapore is the largest contributor, holding 41% of those overseas assets, followed by the Cayman Islands' 32% and Hong Kong's 14%.
The Indonesian bank is also scaling back its ambitions in Malaysia where it operates a remittance business, Ginesky said.
The bank has applied to the Malaysian central bank to upgrade its license to a full-banking one, he said. But given the uncertainty in securing regulatory approval and the 300-million-Malaysian-ringgit capital requirement that he deemed high, he said "we will grow more slowly than previously prioritized."
"From an expansion standpoint, I don't think our overall asset base in Malaysia is going to grow aggressively whether we get the full approval or not," he said.
Domestically, Bank Mandiri is looking to grow its business potentially through mergers or acquisitions, Ginesky said.
The bank will be eyeing large and medium-sized banks, rather than smaller lenders that are being pursued by foreign banks, Ginesky added.
"Most of the smaller banks ... do not have the products and experience we have," Ginesky explained. "We are more focused on banks that have the opportunity to cross-sell or integrate better with our customers to create more businesses," he added, without naming the target banks.
Ginesky also said now is a good time to acquire other banks. Some local lenders have been struggling in the increasingly competitive home market, which could make them good bargains in terms of valuations, he said. Analysts also said the country's banking sector has been battered by weak economic growth in recent years, soft loan growth and waves of corporate defaults.
Improving asset quality is another target for this year, Ginesky said, although he did not elaborate.
Among the four largest banks in Indonesia, including PT Bank Negara Indonesia (Persero) Tbk, PT Bank Rakyat Indonesia (Persero) Tbk, and PT Bank Central Asia Tbk, Bank Mandiri has the highest nonperforming loan ratio after years of aggressive lending to small and medium-sized companies a few years ago, analysts said.
Bank Mandiri will announce its full-year earnings for 2017 in February.
As of Jan. 31, US$1 was equivalent to 13,388.00 Indonesian rupiah and 3.90 Malaysian ringgit.
