SBI plans to make a buy in Indonesia

The State Bank of India is on the lookout for a bank in Indonesia in a cash deal not exceeding $100 million (about Rs 450 crore). 

Indonesia provides high growth potential, and the SBI has identified two to three banks for the acquisition, a senior official of SBI said. “We are not in favour of giving cash more than $100 million,” the official said.  At present, the SBI has a subsidiary in Indonesia called PT Bank SBI Indonesia having six branches. Last year, PT Bank IndoMonex was renamed PT Bank SBI Indonesia.  Increasing the branch network will take time, the official said, adding that inorganic growth is easier and a quicker way to expand. 

According to Indonesian law, an entity cannot run two banks simultaneously. The acquirer has to take over only those banks where the owner or majority holders exit completely and the entity is merged.  The country’s largest bank has 125 foreign offices in 23 countries, including Singapore, the US, Canada and Mauritius. For the second quarter ended September, the SBI’s net profit grew merely 0.4 per cent to Rs 2,501.3 crore from Rs 2,490 crore in the corresponding period a year ago owing to higher provisioning for bad assets.  Bank growth Domestic banks will have to scale up their asset size five times over the next five years if they want to cope with demand for capital from an economy that is clipping at near double digits, says a report by McKinsey & Company .

The No. 1 bank in the country -the report did not name the SBI -will have to scale up its asset size to $800900 billion by 2015 from the current size of $200 billion (March 2009), the report said. The No. 10 bank will have to grow to $90-100 billion by then. The No. 1 Chinese lender will have to grow its size to $4,000-4,500 billion by 2015, up $1,700 billion in 2009.

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