Bank of Tokyo-Mitsubishi UFJ to acquire Indonesia’s Bank Danamon

December 27, 2017

Tokyo- Bank of Tokyo-Mitsubishi UFJ said Tuesday it has agreed to acquire a majority stake in Bank Danamon Indonesia for up to 700 billion yen.

The move is part of the Japanese bank's effort to strengthen its foreign business in response to a slump in domestic operations stemming from the Bank of Japan's negative interest rate policy.

The acquisition is expected to lift the proportion of overseas operations to nearly 50 percent of Tokyo-Mitsubishi UFJ's total earnings, from 40 percent in fiscal 2016, which ended in March this year.

The unit of Japan's Mitsubishi UFJ Financial Group Inc. signed an agreement on the deal on Tuesday with Danamon's largest shareholder, Temasek Holdings Pte. Ltd., Singapore's state-owned investment fund.

Tokyo-Mitsubishi UFJ will complete the acquisition in stages, as the Indonesian government limits initial foreign investment in any domestic firm to 40 percent.

The Japanese bank will initially acquire about 20 percent of Danamon, the fifth largest commercial bank in Indonesia in terms of market capitalization, for 133.4 billion yen by the end of the year.

The stake will be raised to 40 percent by September 2018 and to 73.8 percent eventually. It remains to be determined when the acquisition will be completed. Danamon has strength in auto and business loans.

Indonesia has a population of over 260 million, the largest in Southeast Asia. The country's economy has been expanding at an annual rate of some 5 percent in recent years.

"There is room for future expansion in the banking business" in Indonesia, an official of the Japanese bank said. Mitsubishi UFJ Financial Group invested 9 billion dollars in US financial giant Morgan Stanley following the global financial crisis of 2008.

The Japanese banking group also expanded its operations in Southeast Asia, including by acquiring Thailand's Bank of Ayudhya in 2013, as well as by investing in major commercial banks in Vietnam and the Philippines. Jiji Press