CIMB Sees Indonesia Earnings Edging Out Malaysia
Kuala Lumpur. CIMB Group Holdings, Malaysia’s second-largest lender after Maybank, predicts that in three years, Indonesia’s contribution of profit before tax will beat Malaysia’s, its home base. CIMB also affirmed its plan for a dual listing on the Indonesia Stock Exchange, though currently it is only listed on Bursa Malaysia.
“By 2015, Malaysia will be just under 40 percent, Indonesia will be just over 40 percent, that’s my expectation today,” CIMB Group chief executive Nazir Razak told reporters from Indonesia including the Jakarta Globe, who were invited by CIMB Group to Kuala Lumpur, on Thursday.
Nazir was speaking on the sidelines of CIMB Asean Conference 2012, at the end of a two-day forum that invited executives from various financial companies in Southeast Asia. The forum discussed the role of private sector in the region to drive the economic integration in 10-member countries of the Southeast Asian Nations (Asean).
Nazir said he wanted CIMB Group to be the first company, legally incorporated outside Indonesia, that would list its stocks at the Indonesia Stock Exchange. “That is once the rule is out,” he said, adding he “really urges Bapepam [the Indonesian capital markets regulator] to come up with new rules. The sooner the better.”
Under existing Indonesian regulation, companies that are legally incorporated outside Indonesia are not allowed to list their shares on Indonesia’s exchange. On the other hand, Indonesian companies are not prohibited from listing in overseas markets. Aneka Tambang, the country’s state gold producer, has its shares also listed on Australia’s stock exchange.
A plan to allow foreign companies to list in Indonesia has been delayed for around two years due to legal barriers and accounting matters.
The Malaysian bank’s operation in Indonesia has been flourishing, boosted by its subsidiary Bank CIMB Niaga, the fifth-largest lender in Indonesia, which in the first quarter contributed 32 percent to CIMB Group’s total profit before tax, or equivalent to RM 431 million ($135 million).
The lender’s operation in Malaysia contributed 57 percent during the same January-March period and other countries 11 percent. CIMB Group’s net income before tax was RM 1.34 billion in the first quarter. A diverged earning sources was part of the bank’s aspiration to tap into the fast growing development in the region.
“CIMB is clearly today the most Asean company there is, in terms of earning complexion, in term of management staff integration,” Nazir claimed, adding that the lender also aims to list on the Stock Exchange of Thailand. Indonesia and Thailand are the two biggest economies in Southeast Asia.
In regards to the conference theme, Nazir called on the central banks in the region to synchronize banking regulations.
“There are no such thing as Asean when you go to the central banks today. Asean means nothing. It’s either local bank or foreign bank. This is my big grief,” he said.
The region is moving into an integrated economic community in 2015 that will allow free movement of goods service and people within the countries.
“Banks are the fuel for that to happen, so this framework is very crucial. We should have had this five years ago,” he said.
Nazir’s comments echoed Bank Mandiri’s frustration to open branches in other Asean countries such as in Malaysia
and Singapore. Zulkifli Zaini, Bank Mandiri’s president director, reiterated his frustration with neighboring countries for not giving Indonesian banks the same flexibility given to foreign banks operating in Indonesia, especially with regard to licensing.
Indonesia’s central bank currently allows foreign lenders to operate on a single license. For example, an overseas bank that operates as a commercial lender must get approval from the central bank, Bank Indonesia, for another license for micro-lending.
“In Indonesia, we think it’s not fair. There should be reciprocity,” he said in a conference on Wednesday. Bank Mandiri aims to be among the top five banks in Asean by 2014, in terms of market value.
Analysts said the banks’ eagerness to conquer the region is reasonable given its shining economic growth and young population, at a time when Europe is embroiled in debt crisis and the US economy is slowing. The entire population of the Asean region is now close to 600 million and the average income per capita is around $3,100 per year.