Kookmin gains foothold in Indonesia after bumping up stake in local bank

Kookmin Bank has increased its stake in Bank Bukopin to become the largest shareholder in the medium-sized Indonesian lender, as it works to boost its presence in the Southeast Asian market.

The South Korean bank has acquired new shares issued by Bank Buokopin in two tranches in July and August to boost its shareholding to 67% from 22%. The share purchases were approved at its shareholder meeting, Kookmin said in a statement on August 26.

The new shares were floated to ease the liquidity problem at the listed Indonesian bank, diluting the ownership of existing shareholders, including the Indonesian government and conglomerate Bosowa Corporindo.

Since acquiring a 22% stake in Bukopin in July 2018, Kookmin has aimed to increase its holding. In total, it has spent around 400 billion won ($337 million) to buy shares in Bank Bukopin.

Kookmin has been keen to continue its foray into Indonesia, to offer retail banking, non-life insurance, credit card and personal loan services alongside its non-banking affiliates.

“To ease concerns about foreign ownership (in Bank Bukopin), we have continually expressed our commitment to the Indonesian market and have persuaded Indonesian government officials, major shareholders and other stakeholders. Thus, we were able to to acquire two thirds of its outstanding shares and have secured management rights,” Kookmin said in the statement.

Indonesia has higher lending margins than South Korea. With a population of 268 million, more than five times South Korea, the Southeast Asian market is believed to have more room for growth than South Korea's saturated banking market.

Bank Bukopin, founded in 1970, is a retail lender with 412 branches and offices, as well as 835 automated teller machines across Indonesia. It specializes in pension credit and loans, and lending to small- and medium-sized companies.

To improve business at the Indonesian lender, Kookmin will upgrade its risk management and digital capabilities.

“We will provide company-wide support to Bank Bukopin to grow it as one of top 10 retail banks in Indonesia,” Kookmin said. “In cooperation with other units of the KB Financial Group operating in Indonesia, we will provide comprehensive financial services to the market.”

The share purchases were made after Kookmin disposed of its stake in then PT Bank Internasional Indonesia to Malayan Banking Bhd (Maybank) in 2008.

Kookmin acquired a controlling stake in PT Bank Internasional Indonesia in a consortium with Singapore’s Temasek in 2003, but sold it for a profit in five years in the wake of the global financial crisis.

Yoon Jong-kyu, KB Financial Group chairman, was then chief financial officer of Kookmin Bank and led the investment in PT Bank Internasional.

Write to Soram Jung at ram@hankyung.com