Rabobank steps back from Asia with Indonesia unit sale

HONG KONG Thu Nov 29, 2012 4:57pm IST

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HONG KONG (Reuters) - Rabobank RABN.UL joined the ranks of financial institutions scaling back operations in Asia after it put its Indonesian unit up for sale, in a deal that could fetch around $400 million, sources said.

Rabobank, which has its roots in the Dutch farming sector, earlier this year said that its international operations will focus on providing banking services to the food and agricultural industry.

It sold its majority stake in private Swiss bank Sarasin BSAN.S for 1.04 billion Swiss francs ($1.12 billion) to global private banking group Safra late last year, and has put its fund management business, Robeco, up for sale.

Rabobank, the Netherlands' largest retail bank, will continue to do business with some of its key Indonesian customers out of Singapore and Hong Kong, one of the sources said. The Indonesian unit, which includes retail banking, is no longer a strategic fit, the source added.

Several European and U.S. financial institutions have already cut back their operations in Asia or even pulled out altogether to focus on their home markets in the wake of the 2008 global financial crisis.

Morgan Stanley (MS.N) has been hired by Rabobank to find a buyer for the unit, according to the sources, who had direct knowledge of the matter. The process is expected to draw interest from banks in China, Japan, South Korea and local Indonesian banks, they added.

Indonesia is the only Asian country where Rabobank has retail operations.

Rival Dutch financial group ING (ING.AS), UK government owned Royal Bank of Scotland (RBS.L) and British insurer Aviva plc (AV.L) are among the companies that have sold part of their Asian operations in recent years.

RICH VALUATIONS

Rabobank entered the Indonesian market in 1990 and operates 90 branches in the country. It had assets worth 13.3 trillion Indonesian rupiah ($1.4 billion) at the end of 2011, according to its annual report. It also lends to Indonesia's small and medium companies and runs a wholesale banking business.

The unit earned a net profit of 41.58 billion Indonesian rupiah ($4.3 million), a fraction of the group's 2011 profit of 2.6 billion euros ($3.36 billion).

Rabobank and Morgan Stanley declined to comment. The sources declined to be identified as the information was not public.

Valuations of publicly traded Indonesian banks are among the most expensive in the world, carrying an average price-to-book ratio of 2.5, according to Thomson Reuters data. That compares with the Asian average of 1.4 times.

Rabobank's Indonesian unit had an estimated book value of $135 million, one of the sources said, and applying a multiple of up to four times would give a deal value of $400 million.

Indonesia, Southeast Asia's biggest economy and a major commodities producer, is expected to grow at over 6 percent this year, after sealing the highest full-year growth in 15 years in 2011. That is boosting credit growth in a country that has a population of about 250 million.

The growth potential has attracted some foreign banks to the country. But earlier this year, Indonesia's central bank issued new guidelines capping foreign ownership in domestic banks at a maximum of 40 percent, making it hard for foreign lenders to buy controlling stakes in Indonesian banks.

(Additional reporting by Sara Webb in Amsterdam; Editing by Muralikumar Anantharaman and Mike Nesbit)

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