Bank Syariah Mandiri could launch IPO as early as 2013 (By IFN)

INDONESIA: Bank Syariah Mandiri (BSM) is reportedly deliberating on an initial public offering (IPO) to be launched as early as next year, as its shareholder Bank Mandiri pushes for a public float of its subsidiaries in order to abide by the country’s new regulations on bank ownership.

According to the new rules, banks owned by other banks must issue a minimum of 20% of their shareholding to the public by 2019. Zulkifli Zaini, the president director of Bank Mandiri, said that plans for BSM’s IPO are expected to be drawn out next year, while Yuslam Fauzi, the president director of BSM, has said that 2014 appears to be the ideal year for a public float.

Nonetheless, Sunarso, the director of commercial and business banking at Bank Mandiri, has reportedly expressed optimism that the IPO could take place as early as 2013.

Yuslam has also noted that BSM needs to raise up to IDR1 trillion (US$108.7 million) in order to strengthen its capital adequacy ratio (CAR), although Bank Mandiri has committed to providing it with capital support until 2015.

Meanwhile, with the Indonesian central bank’s recent directive on single ownership in local banks seen as a possible deterrent to new investments in the country’s banking sector, an IPO could provide the best route for banks looking to raise funds. The country has also seen an uptick in IPO activity this year, amid strong demand from local investors, with 13 companies listed on the Indonesia Stock Exchange in the first half of this year.

Furthermore, the Indonesian economy has bucked the trend of slowing global growth, fuelled by its booming domestic sector.

With BSM preparing for its stock market debut amid buoyant investor sentiment and local rules encouraging bank listings, could the bank’s IPO open up room for the country’s other Islamic banks to tap the equities market to raise funds?