BT Explains: Singtel's stake in digibank-hopeful Bank Fama International

SINGAPORE'S largest telco Singtel Z74 on Friday (Jan 21) said it has acquired a 16.3 per cent stake in Indonesian bank, Bank Fama International, for a cash consideration of 500 billion rupiah (S$48 million).

The investment is part of Singtel's plans to pursue banking opportunities in Indonesia. The telco also has a digital banking joint venture in Singapore with Nasdaq-listed digital services player Grab.

What is Bank Fama International?

Fama is headquartered in Bandung, Indonesia. Established in 1993, it is a commercial bank focused particularly on small and medium-sized enterprises (SMEs).

Who owns Fama?

The bank is majority-owned by a subsidiary of Indonesia-listed media and technology conglomerate Elang Mahkota Teknologi, also known as Emtek Group. Emtek agreed to acquire 93 per cent of Fama in September last year.

Emtek is a shareholder of Grab Indonesia. Meanwhile, H Holdings - a unit of Grab - also holds a 4.6 per cent stake in Emtek. Additionally, Emtek is the largest shareholder of Indonesian e-commerce company Bukalapak, which in August 2021 went public in Indonesia's largest initial public offering (IPO) on record.

Both Bukalapak and Grab have also announced plans to own stakes in Indonesian digital lender Bank Allo.

Is Fama doing well financially?

Fama was reportedly in talks for an IPO on the Indonesia Stock Exchange in 2020, but the plans were cancelled as the company was trying to meet new minimum core capital requirements set out by Indonesia's financial services authority (OJK).

OJK required banks to have a minimum core capital of 1 trillion rupiah by the end of 2020, 2 trillion by the end of 2021 and 3 trillion by the end of 2022.

Fama's core capital was 270.54 billion rupiah as at Jun 30, 2020; it originally wanted to meet the gap through the IPO, but this was later met through a capital deposit by its shareholders instead.

The bank reported a net profit of 40.5 billion rupiah for its third quarter ended Sep 30, 2021, compared to 5.3 billion rupiah in the same period a year ago, largely due to a fall in expenses.

It posted a surge in net interest income to 65.7 billion rupiah for the quarter, from 37 billion rupiah in the same quarter in 2019.

For FY2020, however, it had reported net profit of 11.3 billion rupiah - down from 14.2 billion rupiah in FY2019. Net interest income was 47.7 billion rupiah, down from 51.7 billion in FY2019.

Why is Singtel buying a stake in Fama?

Singtel's stake in Fama marks yet another push for Singapore's largest telco into the digital banking industry. Singtel's digital banking tie-up with Grab has bagged a digital full-bank licence in Singapore; the joint venture has also applied for a digital banking licence in Malaysia.

"We are fully aligned with and share Fama's digital banking proposition to serve Indonesia's unbanked and underbanked population and drive greater financial inclusion," Singtel's group chief executive officer Yuen Kuan Moon said.

Industry watchers have noted a rush among technology giants in Indonesia to buy banks or stakes in banks, and transform them into digital banks. Other similar tie-ups include Gojek's stake in Bank Jago and Sea's stake in SeaBank.

Singtel said the investment is part of its "strategic reset of riding digital growth trends to build sustainable new business across Asia", particularly in markets where the group has a strong presence.

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