Khazanah announces merger of Lippo, Niaga

Khazanah Nasional, the Malaysian government's investment arm, confirmed it will merge Lippo Bank and Bank Niaga in Indonesia, creating the country's sixth largest bank by assets to comply with competition regulations, The Financial Times reported Monday (31/12/07).

The merger will bring Khazanah into line with Indonesia's single presence policy (SPP), which obliged companies that own more than one bank to announce by the end of last year whether they plan to merge them, reduce their controlling stakes or create a single holding company.

In a statement, Bank Niaga said that Khazanah planned to take the first option "to the extent that the merger can be completed on commercially viable and legally permissible terms".

Bank Niaga is Indonesia's second largest mortgage lender while Lippo Bank has focused on commercial loans and consumer savings accounts. Based on September figures, the merger would create a company with assets of about Rp85.6 trillion ($9 billion).

The merged bank would have more than 600 branches. Standard & Poor's, the credit rating agency, said it expected the proposed merger to create a bank with stronger market position and competitiveness with significant potential synergies.

The SPP is part of a reform package introduced by Bank Indonesia, the central bank, to streamline and strengthen the fragmented banking industry, which now includes about 130 banks.
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