OCBC - CGS-CIMB Research 2023-11-16: Deepening Its Indonesian Presence

• PT Bank OCBC NISP (OCBC Indonesia) announced today (16 Nov 2023) that it will be acquiring 99% of the shares in PT Bank Commonwealth (PTBC) from Commonwealth Bank of Australia (CBA) for an upfront cash consideration of ~A$220m (~S$191m), valuing PTBC at ~0.5x FY23F P/BV. OCBC Indonesia is currently trading at ~0.7x FY23F P/BV.
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• According to OCBC (SGX:O39), OCBC Indonesia also intends to acquire the remaining 1% shares of PTBC from the other (local) shareholders

Acquiring for an upfront cash consideration of ~S$191m

• The acquisition will be funded through internal cash and is subject to regulatory approvals from the Financial Services of Indonesia (Otoritas Jasa Keuangan), Annual General Meeting of shareholders and satisfaction of certain other conditions.
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PT Bank Commonwealth (PTBC) at a glance (as at 30 Sep 2023)

• PT Bank Commonwealth (PTBC) has been loss-making since 2020 due to declining customer volumes. It recorded more than 1.2m customers.
  • Total assets of ~S$1.4bn, net assets of ~S$355m, CET1 of 38.4%, gross loans of S$735m, total deposits of S$735m.
  • Gross NPL ratio of ~1.95%. This ratio had eased from ~5.1% in FY20 due to the provision of the Standby Letter of Credit from CBA in relation to the Debt Relaxation Programme (related to COVID-19 exposure).
  • It has 30 branches, 30 e-kiosks and 74 ATMS in 23 major cities across Indonesia.
• According to OCBC, there is little overlap between OCBC Indonesia and PTBC – the former focuses on corporate clients while the latter focuses on the retail and SME segments. PTBC has complementary capabilities in wealth management and auto joint financing that can be leveraged by OCBC Indonesia.

Reiterate ADD on OCBC with an unchanged GGM-based target price

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Andrea CHOONG CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2023-11-16 SGinvestors.io

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