Bahrain's Al Baraka eyes $30-50m on Indonesia buy

Bahrain-based Islamic lender Al Baraka plans to spend $30-50 million to buy a bank in Indonesia, its chief executive officer said on Monday, in the latest move by an international bank into southeast Asia's largest economy.

"Indonesia is a target market for us. We have a representative office there and one of its responsibilities is to find a target," Adnan Yousif told Reuters in a phone interview.

"Bank Kesawan is one of them," he said.

Al Baraka and PT Bank Kesawan Tbk were close to signing a deal last year that was put on hold due to the financial crisis, he said. Bank Kesawan is a small Indonesian lender with a market capitalisation of $48.56m, according to Thomson Reuters data.

Yousif said Al Baraka had now returned to its strategy of growing through acquisitions in Asia and would spend between $30-50m on an acquisition in Indonesia. He said Al Baraka would prefer one of Indonesia's small to medium-sized private banks.

Al Baraka is the latest bank to show interest in Indonesia's financial services sector as firms look to take advantage of its 250 million population.

Malaysia's fourth-biggest lender, RHB Capital, will buy a controlling stake in a small Indonesian bank, a source familiar with the issue told Reuters on October 16.

Yousif said Al Baraka, which is Bahrain's largest listed Islamic bank with operations in twelve countries predominantly in the Middle East, had yet to begin talks with targets.

The $1 trillion Islamic finance industry is scattered between its main centres, the Gulf Arab region and South East Asia, and its banks are small in size.

Consolidation across regions would help the industry develop larger institutions able to compete with the Islamic operations of large Western banks and standardise its interpretation of shariah, or Islamic law, but previous attempts have failed.

Bahrain-based Islamic investment house Unicorn said last month it is again interested in buying Dubai Group's stake in Malaysia's Bank Islam, after a first attempt at buying a stake in the bank fell through in 2006.

Meanwhile, Al Baraka also said on Monday the initial public offering (IPO) of its Syrian unit has been oversubscribed.

"We have already 150 per cent, and I anticipate we will close at around 200 per cent," Chief Executive Adnan Yousif told Reuters.

The subscription period for the IPO – open only to Syrians – ends November 4. Bank Bemo Saudi Fransi is managing the sale.

The bank is targeting some $38 million for a 35 per cent stake in the unit, in which Al Baraka owns 24 per cent and Emirates Islamic Bank holds 10 per cent.

The Syrian government is trying to encourage IPOs after the launch of the Damascus Securities Exchange in March. There are 11 companies listed on the exchange, which was launched under government plans to cautiously liberalise the economy.

Syria places restrictions on foreign investors stakes in local firms and on the repatriation of foreign capital.

Al Baraka's IPO is the second by a Gulf Arab bank after Qatar National Bank (QNB) floated its Syrian unit in July.