ANZ increases stake in Panin

ANZ may finally be setting up a serious expansion into Indonesia's banking market with the purchase of an additional eight per cent stake in PT Bank Pan Indonesia.

Panin Bank has had ANZ as an investor since the opportunistic purchase of a 29 per cent stake at the height of the Asian crisis (with the due diligence undertaken in mid 1998 and the actual investment made in early 1999).

ANZ yesterday said it paid US$114 million for an additional 8.4 per cent stake in Panin, with the shares bought from institutional investors.

The transaction values Panin at US$1.38 billion, or A$1.98 billion, which is more than double the effective book value of Panin used by ANZ in the bank's September 2008 accounts. The purchase price is about 1.8 times Panin's book value.

The investment may make ANZ's investment in Indonesia the largest of any regional investment for the bank (and taking into account the possible write-downs on one larger notional investment in AMMB in Malaysia given market values of that stake).

In order for ANZ to realise much of its ambition to become a "super regional" bank in Asia it needs to take control of banks with serious distribution footprints. Of ANZ's minority stakes, the investments in Panin and AMMB are the two where the bank must want to own more of their partners.

Whether the influential Gunawan group, with extensive interests in steel and other business interests, is a likely seller of the family investment company's 44 per cent stake in Panin is doubtful.

Panin has said it wants to be a top five bank in Indonesia by 2012 (from a recent ranking of about tenth).

ANZ said last year it planned to invest heavily in branches of its majority-owned subsidiary ANZ Panin over the next four years. That plan calls for ANZ Panin to expand from only two branches at mid 2008 to 50 branches over the next three years in six key cities, including Jakarta, Surabaya, Medan, Denpasar, Bandung and Semarang.