Chairman Lee Dong-geol of Korea Development Bank (KDB).

The Korea Development Bank (KDB) is going after M&As with Indonesian financial companies to boost its presence in the Southeast Asian market, a source said recently.

The state-owned firm is said to be targeting a financial firm that has a license to offer a range of services, from leasing and consumer financing to credit card financing in the region.

The state-run policy bank retained Deloitte Korea as its adviser to find potential targets there for acquisition.

This is also part of KDB's efforts to look beyond Korea's crowded financial market, where commercial and policy banks are facing difficulties in generating positive cash flow amid low interest rates.

“The consulting process has been completed. The policy bank is currently reviewing its adviser's suggestions.” a KDB official said. “We do not yet have any plans to announce what we are going to do at this point.”

The KDB is considered to be a latecomer in the Southeast Asian financial market.
KDB operates offices in Bangkok, Ho Chi Minh City, Yangon and Manila out of its office in Hong Kong. The bank set up a rep. office in Indonesia in February.

“The bank is keen on taking over a financial company that offers a wide range of services, not just any lender.” an industry source said.

“It is difficult to acquire a commercial bank there due to regulations. KDB will also need a certain amount of capital before acquiring a bank there. But there are less regulations in acquiring such financial companies. Prices aren't very high either.” a source said.

Indonesian multi-finance companies mostly offer loans to retail and corporate customers with difficulties in securing capital from commercial banks there.

The country's largest multi-finance company ADSF accounts for only an 8 percent market share, according to an industry source.

The state-run bank's advance into the country is also in line with the Moon Jae-in administration's aim to boost economic ties with the region.

Indonesia's Financial Services Authority has relaxed regulations enabling local multi-finance companies to boost their retail and corporate loan services, as well as their participation in infrastructure projects.

In January, the regulator also relaxed rules enabling them to extend car loans.
Investors from South Korea have also shown interest in investing in Indonesian banks.

One example is the acquisition of a 77 percent share in small-sized lender Bank Dinar by South Korea’s financial services firm Apro Financial last year. Apro Financial also owns a 99 percent share in another small lender Bank Oke Indonesia.

The two local subsidiaries of Apro Financial will be merged as well, effective as of May 2.

Recently, the Industrial Bank of Korea (IBK) acquired a 71.68 percent share in Bank Mitraniaga. IBK has also become the controlling shareholder of Bank Agris.

The South Korean bank will merge two publicly listed local lenders, namely Bank Mitraniaga and Bank Agris. After the merger, the combined bank will have a core capital of between Rp 1 trillion ($70.8 million) and Rp 5 trillion.

Big local banks are also joining the game. Jahja Setiaatmadja, president director of Bank Central Asia (BCA), said recently that the country’s biggest private lender would acquire a private bank in the BUKU I category soon.

Banks categorized under the BUKU 1 category are those with core capital of less than Rp 1 trillion.

A scene from an opening ceremony for a rep. office for Korea Development Bank in Jakarta, Indonesia, on Feb. 26 with some 100 both local and Korean financial leaders attending led by Korean Amb. Kim Chang-beom to Indonesia, Senior Vice Chairman Suh Sung-joo of KDB and Vice Gov. Imansyah of the Indonesia financial authorities(OJK) among others. (Photos: KDB)