As a recap, Panin Bank is the 12th largest lender in Indonesia currently majority owned by ANZ and Gunawan family. The bank now trades at 0.76 times trailing book, vs. 0.9 times in Dec. Its market cap is now $3.2 billion, and DBS’s proposed 86% stake would equal $2.7 to $2.8 billion.
The analysts note that after the $3 billion buyback announcement in 3QFY2024, DBS still has $3 billion to $5 billion of surplus capital on a fully loaded basis. They take into account the bank’s capital return dividend of 60 cents per year, and the 24 cents DPS increment, which will lead to a $4 billion organic capital formation a year.
Assuming moving standard deviation (MSD) asset growth, the organic capital needs would be
$2 billion to $3 billion, meaning DBS could generate $1 billion to $2 billion surplus capital a year in 2025-27.
As such, acquisition price for a Panin Bank deal would amount to one to two years of organic surplus DBS can generate, Wong and Chen note.
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“Neither Panin Bank nor DBS has commented on the Reuters report. We maintain our view that DBS has the financial and capital capacity to acquire Panin Bank without compromising its capital return plan,” they say.
The analysts reiterate DBS as its preferred Singapore bank given its lowest net interest margin sensitivity amid SORA weakness, strong commitment to capital return and execution track record.
“Given most of the surplus capital has been designated for return or growth already, we think the story going forward is more driven by profit extraction from these growth investments (e.g. Citi Taiwan and other newly acquired markets) and further productivity gains from its leading tech/AI infrastructure under Su Shan's leadership,” they end.
Shares in DBS closed 36 cents lower or 0.775% down at $46.11 on Apr 1.
