[SINGAPORE] A potential acquisition of Indonesia’s Panin Bank could benefit from DBS’ strong track record of turning around unprofitable targets, and is a good place for South-east Asia’s biggest bank to park its surplus capital, analysts have said.
Citi research analyst Tan Yong Hong cited DBS’ 2020 acquisition of India’s Lakshmi Vilas Bank as an example. The bank was merged into DBS Bank India following the purchase.
He noted that acquiring Panin could offer scale and earnings diversification for DBS, and added that Panin’s branch network could lower funding costs, expand consumer lending, and put DBS’ loans market share among Indonesia’s top 10.
The analyst’s comments follow a Mar 26 report citing sources that DBS is the frontrunner to buy the bank, edging out CIMB.
Other analysts have also described acquiring Panin as a good way for DBS to use its excess funds.
Jefferies equity analysts Sam Wong and Chen Shujin said in a report on Tuesday (Apr 1): “We maintain our view that DBS has the financial and capital capacity to acquire Panin Bank without compromising its capital return plan.”
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DBS previously announced a capital return dividend of S$0.15 per share per quarter, to be distributed over the financial year 2025. It expects to maintain a similar payout over the next two years.
The share price of Panin Bank, Indonesia’s 12th largest lender, has fallen 17 per cent since December, bringing its current market capitalisation to about 39 trillion rupiah (S$3.2 billion). An 86 per cent controlling stake currently held by ANZ (39.22 per cent) and the Gunawan family (46.52 per cent) would cost about S$2.8 billion, Jefferies estimated.
The sum could be funded using one to two years of surplus capital generation, the analysts wrote, pointing to the S$1 billion to S$2 billion in surplus capital that DBS could generate each year between 2025 and 2027.
Citi’s Tan estimated that DBS could generate about S$5 billion in excess capital over the same period, based on a Common Equity Tier-1 ratio of 13.5 per cent.
While Panin Bank has a single-digit return on equity of 6 per cent, Tan wrote that DBS has a strong track record of turning around loss-making acquisitions.
It has a physical network of more than 500 branches and over 800 ATMs that will complement DBS’ Indonesia digital operations through its “phygital” strategy.
For the full year ended Dec 31, 2024, net profit from DBS’ South and South-east Asia segment – which includes its operations in India and Indonesia – rose to S$357 million, up from S$325 million the year before.
Panin Bank reported a 4.6 per cent decline in net profit to 2.9 trillion rupiah over the same period.
Neither DBS nor Panin Bank has commented on the matter.
Jefferies maintained a “buy” call on DBS shares, with a target price of S$52. The stock closed at S$46.04 on Wednesday, down S$0.070 or 0.2 per cent.
