MUFG hopes to begin buying Bank Danamon Indonesia stake early 2018

FILE PHOTO - People walk past a branch of Mitsubishi UFJ Financial Group's bank of Tokyo-Mitsubishi UFJ (MUFG) in Tokyo, Japan, May 16, 2016. REUTERS/Thomas Peter/File Photo

Indonesia’s financial regulator expects Mitsubishi UFJ Financial Group Inc. (MUFG) to begin accumulating a stake in PT Bank Danamon Indonesia early next year, as Japan’s biggest bank expands in the most populous Southeast Asian nation.

MUFG will probably buy 40 percent of Danamon in two phases, the first of which may take place early in 2018, Aristiadi, head of foreign bank supervision at the regulator known as OJK, told a group of reporters in Jakarta on Wednesday. Danamon shares extended gains after the comments.

Tokyo-based MUFG has expressed interest in buying the shares from Singapore’s state investment firm Temasek Holdings Pte. The Japanese bank’s main lending unit is seeking to spend 200 billion yen ($1.8 billion) on the stake and may consider obtaining a majority holding in the future, the Nikkei newspaper reported last month.

MUFG “will report to OJK and purchase a minority stake under the first phase early next year, without needing approval,” Aristiadi said. “If they want to buy 40 percent or more, they will need our approval as it needs to meet the test first.”

Indonesia largely restricts foreign banks from owning more than 40 percent of local lenders. OJK said last month that MUFG should consider merging its local unit with Danamon, citing the nation’s single-presence policy.

Representatives from MUFG and Temasek declined to comment.

Shares of Danamon jumped 8.3 percent at 3:49 p.m. in Jakarta. The stock has climbed 15 percent since reports of MUFG’s interest in the company emerged on Nov. 9.