Competition heats up for banks
SINGAPORE’S Oversea-Chinese Banking Corp Ltd’s (OCBC) reported mulling over a bid for control of Indonesia’s PT Bank Permata comes at a time when things are already very challenging for banks.
According to Bloomberg, deliberations are still at an early stage, but if OCBC is successful, it would spell extra competition for Malaysia’s banks, especially those with presence in Indonesia.
The two Malaysian lenders which currently have banking operations in Indonesia are Malayan Banking Bhd and CIMB Group Holdings Bhd via their units PT Bank Maybank Indonesia Tbk and PT Bank CIMB Niaga Tbk, respectively.
Previously, other Malaysian banks have tried to expand into Indonesia’s commercial banking space, but have been unsuccessful.
OCBC’s move could create Indonesia’s fifth-largest lender and would add on to its presence in South-East Asia’s largest economy.
It comes at a time when banks in Singapore are facing the prospect of a trade war-induced slowdown. Singapore recently slashed its gross domestic product growth estimate for 2019 to between zero and 1%.
Notably, Singapore’s top-three banks - DBS Bank Ltd, OCBC and United Overseas Bank Ltd - posted record results for the first-half of 2019, but risk is growing for them with concerns on the economy.
Malaysian banks are also bracing for a slowdown. The second-quarter earnings of local banks, with the exception of Public Bank Bhd, have yet to be released and analysts are expecting them to come in lacklustre.
Over at Indonesia, meanwhile, the government has signaled a relaxation of the country’s banking rules as part of a wider strategy to encourage investment into its financial services industry.
Other financial services giants such as Japan’s Mitsubishi UFJ Financial Group are also looking to strengthen their presence in Indonesia. This brings us to the question of what is the strategy for Malaysian banks to fight rising competition from rivals like OCBC.
Is the creation of a mega-Islamic bank worth a revisit and an answer to this?