Bank Danamon shares fall 5% on DBS uncertainty

JAKARTA (REUTERS) - Shares in Bank Danamon Indonesia Tbk PT dropped as much as 5 per cent on Wednesday, pressed down by uncertainty over whether Singapore's DBS Group Holdings Ltd will be able to purchase a majority stake in the Indonesian lender.

Indonesia's central bank said Singapore needed to open up its banking sector to Indonesian companies if it wanted DBS to buy more than the 40 per cent stake in Danamon that it approved on Tuesday. The Monetary Authority of Singapore (MAS) said the two countries were looking at ways to give their banks further access to each other's markets.

Bank Danamon was trading down 2.50 per cent at 5,850 rupiah (76 Singapore cents) by 0346 GMT, after sliding as much as 5 per cent.

Analysts said it was not known whether DBS could purchase a majority stake in Danamon since it would need to pass three financial-soundness tests, which would take at least 18 months.

"There is uncertainty over the tender offer on the remaining shares unless the MAS is more lenient in accommodating Indonesia banks' greater access in Singapore," brokerage Mandiri Sekuritas said in a research note.

Under its original proposal, DBS wanted to buy 67.4 per cent of Danamon from its majority owner, Singaporean state investor Temasek Holdings (Private) Ltd, then buy the rest from minority shareholders. Temasek also owns 29 per cent of DBS.

DBS stocks and bonds showed little reaction to the news on Wednesday. Shares edged up 0.29 per cent at S$17.400, while its bonds held steady at a spread of 165/155 basis points over US Treasuries.

"The Danamon acquisition isn't likely to impact DBS' spreads, if at all. This is because Danamon represents just 6-7 per cent of DBS' balance sheet," said CreditSights analyst Matthew Phan.