Standard Chartered has sold its stake in Indonesia’s Bank Permata for $1.3bn in a move that will free up capital that could be used to fund a fresh share buyback.
The emerging markets bank said it had sold its 44.56 per cent stake in the Jakarta-based lender to Thailand’s Bangkok Bank, which also acquired a stake of the same size from Astra International, the Indonesian group controlled by the Hong Kong conglomerate Jardine Matheson.
Bill Winters, StanChart’s chief executive, said: “The sale of our stake in Permata will allow us to focus on our wholly-owned business in the . . . Indonesian market, and will release capital for reinvestment or return to shareholders.”
Shares in StanChart increased 2.23 per cent in mid-morning trading in London.
StanChart effectively put its stake in the bank up for sale in February when it reclassified the holding as “noncore” as part of a strategic overhaul.
Gary Greenwood, a banks analyst at Shore Capital, said the stake sale appeared “to represent excellent value for the group . . . given Permata’s relatively low profit contribution”.
The sale price represented a price-to-book multiple of 1.77 times book value, StanChart said in a statement.
Upon completion, the disposal of the stake is expected to generate a pre-tax gain of $500m, while boosting the bank’s core equity tier one ratio — a key measure of balance sheet strength — by 50 basis points to about 14 per cent.
Mr Greenwood said the move would “improve capital flexibility and potentially support further returns to shareholders by way of share buybacks”.
For Bangkok Bank, the acquisition will help it find growth away from its maturing home market. Charamporn Jotikasthira, Bangkok Bank’s executive director, said Indonesia was a “key focus” for the bank, with one of Asia’s fastest-growing economies and favourable demographics at a time of growing economic integration in south-east Asia.
“We have a strategy of connecting the region for our clients as they look to expand internationally,” Mr Charamporn told a news conference in Bangkok.
Permata is Indonesia’s 12th biggest bank ranked by assets, and Bangkok Bank is one of Thailand’s largest, with assets worth $105bn as of the end of September.
In a note to investors published before StanChart announced the sale, Ian Gordon, a banks analyst at Investec, predicted that the sale of Permata at a good price could be used to fund a buyback of about $1bn.
StanChart could announce a buyback alongside its full-year results in February. If the lender proceeds with the capital return, it would be the second time it has bought back its shares in the space of a year.
The bank last announced a $1bn buyback in April, marking the first time in a generation that it had acquired its own shares.
However, StanChart and Bangkok Bank said the deal was subject to regulatory approval — a critical condition, because Indonesia imposes a 40 per cent cap on foreign and domestic financial institutions’ ownership of local banks.
“It’s not a done deal until the regulator signs off on the transaction,” said Gary Hanniffy, director, financial institutions at Fitch Ratings in Jakarta.
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