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DBS Ups Exposure to Emerging Market Growth via Deal

Monday, 2 Apr 2012 | 4:42 AM ET

DBS's acquisition of Indonesia's Bank Danamon is transformational, the Chairman of the Singapore-based lender told CNBC on Monday.

Danamon Stake to Bring More Asia Coverage: DBS Chairman
Peter Seah, Chairman, DBS, says the Danamon acquisition will provide DBS a greater coverage of the greater China, South Asia and Southeast Asian markets. He explains why Indonesia will not elevate risk in the bank's profile.

Peter Seah said it will help increase the bank's exposure to Southeast Asia and contribute to 14 percent of its total profits.

"We are, except for Singapore, pretty much a small operator in the rest of Southeast Asia," Peter Seah said. "So this really moves us up and provides us coverage in the three major markets of Greater China, South Asia and Southeast Asia. So I would say that you would have a new DBS."

Indonesia is considered a key growth market in the region, with low bank penetration and high rates of loan growth. Bank Danamon forecast loan growth of 18 to 20 percent for 2012, and reported loan growth of 23 percent in 2011.

Speaking in Jakarta, DBS's CEO Piyush Gupta said the deal would increase the bank's exposure to high-growth markets from 11 percent to 33 percent.

Bank Danamon faces high financing costs, according to analysts, something DBS's strong balance sheet could help lower. On Monday, Fitch Ratings put Bank Danamon on rating watch positive after the deal was announced and said the lender's risk profile will improve on the new owner.

DBS has staked its reputation on being Asia's safest bank, a slogan that it uses in its advertising. Asked about whether buying into Indonesia could pose risks from weaker credit quality, Seah said the bank's experience would help it manage the risks.

"We don't think Indonesia is an issue, it's a market that we know well," he said. "Many of my board members know Indonesia, Piyush knows Indonesia, and I know Indonesia. So I don't think this Indonesia foray is going to dramatically make any changes to our risk profile."

- Reuters contributed to this report.

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