KDB pursues acquisitions in Indonesia

Korea Development Bank Chairman Lee Dong-gull

By Jhoo Dong-chan

The Korea Development Bank (KDB) is seeking to acquire Indonesian financial companies to boost its presence in the Southeast Asian market, a source said Tuesday.

It is said to be targeting companies that have 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 has retained Deloitte Korea as its adviser to list potential targets there for acquisitions.

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.

Apart from its office in Hong Kong, KDB operates offices in Bangkok, Ho Chi Minh City, Yangon and Manila.

It set up an office in Indonesia in February.

“The bank could acquire a local lender in Indonesia, but it looks keen on trying to take over a financial company that offers a wide range of services,” 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.”

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.