Phillips Securities sees positive outcome in Danamon acquisition

DBS has the funding capabilities to increase Danamon’s growth.

The acquisition of Danamon bank in Indonesia by DBS is expected to have a positive impact says Phillips Securities Research.

In its report, the group said that strong demand for banking services in Indonesia, and therefore high growth is potential.

"The GTS business, which has been a main driver of DBS growth, will also benefit from this acquisition. This leads to higher net income. However, this acquisition will also increase DBS’s risk weighted assets, leading to a higher impact should asset quality worsen. We feel that the price is reasonable given the benefits that the deal will bring to the group," the research firm said.

DBS recently acquired the Indonesian bank through a conditional purchase agreement with Fullerton Financial Holdings Pte. Ltd. to acquire 100% of its wholly-owned subsidiary Asia Financial (Indonesia) Pte. Ltd., which holds a 67.37% stake in PT Bank Danamon Indonesia Tbk for total consideration of approximately S$6.2 billion.