Jakarta. Bank Central Asia, Indonesia’s largest lender by market value, is soft-pedaling its search for other banks to acquire due to the recent slowdown in the economy.

BCA wants to see which of the country’s smaller banks can weather the tougher economic conditions before deciding on potential takeover targets, said Chief Executive Officer Jahja Setiaatmadja.

“We may not do it this year,” Setiaatmadja said in an interview in Jakarta earlier this month. “I’d rather see for another seven to eight months, to see which small banks can make it during this soft patch.”

BCA wants to buy two small banks that focus on trade finance, he said.

The Indonesian government has been pushing the country’s 118 banks to merge in order to re-capitalize weak institutions and strengthen the financial sector.

The economy has slowed due to weaker global commodity prices, with growth dropping to just above 5 percent in 2014 from 5.58 percent the previous year.

BCA has budgeted Rp 1.5 trillion ($115 million) for acquisitions and for capital injections into its subsidiaries.

It owns an insurer, a brokerage, an Islamic bank and two finance companies, and plans to grow those operations in 2015, Setiaatmadja said.

Conservative Lending

Founded in 1957, BCA is the only top five Indonesian bank not owned by the government. With a market value of $25.5 billion, it is the nation’s largest and ranks fourth in Southeast Asia. FarIndo Investments Ltd., controlled by Indonesia’s richest man Budi Hartono and his brother Bambang, owns 47.2 percent of the bank, according to BCA’s website.

BCA’s bad loans stood at 0.7 percent of total loans in March, well below the average of 2.4 percent in the Indonesian bank sector as a whole.

The bank’s loan-to-deposit ratio is also conservative in comparison with other Indonesian lenders.  For each dollar of deposit, the bank lends out 75 cents, Setiaatmadja said. That compares with the average of 88 cents in the dollar across all Indonesian banks.

BCA will keep its loan-to-deposit ratio below 80 percent to ensure it has enough liquidity for future growth and deal with any potential economic turbulence, said Setiaatmadja.

“Liquidity is not just the king, but near God,” said Setiaatmadja. “I think 74 to 80 percent, that’s the level we want to reach, I don’t want to go further.”

Bloomberg

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