KUALA LUMPUR: ICB Financial Group Holdings AG (ICBFGH), a company controlled by former finance minister Tun Daim Zainuddin and which owns stakes in banks across Asia, Africa and Europe, is selling a 30% stake in Indonesia’s Bank ICB Bumiputera.

Bank ICB, with assets of about 7 trillion rupiah (RM2.19 billion), is a small-sized commercial lender that has been listed on the Indonesia Stock Exchange since 2002.

ICBFGH, which holds a 69.9% stake in the Indonesian lender, is selling 30% to financial services company MNC Kapital Indonesia, Indonesian media reported two weeks ago, citing a statement released by MNC.

The two parties have inked a conditional sale and purchase agreement but did not reveal the purchase price. The deal, which needs the Indonesian central bank’s approval, is expected to be completed in the second quarter of this year.

Even after the transaction, ICBFGH, in which Daim holds a 61.3% stake, will still be the biggest shareholder of Bank ICB with its remaining 39.9% stake.

The fact that ICBFGH wants to reduce its bank holding in Southeast Asia’s most lucrative banking market is not all that surprising, analysts said, pointing out that Bank ICB has not performed all that well financially in recent years.

Speculation was rife as far as two years ago that a stake sale could be in the offing after Bank ICB reported a loss of US$14.3 million (RM43.47 million) in its 2011 financial year (FY11) due to high provisioning expense.

This adversely impacted ICBFGH’s earnings and led to the group reporting a loss in FY11 too, albeit a smaller one amounting to US$3.1 million.

ICBFGH CEO Tai Terk Lin, who spoke to The Edge Financial Daily in a rare media interview last year, had indicated that the group would be willing to divest 20% of its holding in Bank ICB if the “right partner” came along.

He had said that this was a possibility as the bank would likely be going to the market in 2013 to raise funds as its capital adequacy ratio had fallen to 10.5%. At that time, Bank ICB accounted for more than half of ICBFGH’s total assets. The bank managed to book a small profit last year.

The fact that the bank has not been doing so well, combined with the likelihood that the transacted price was good, is probably why the group decided on reducing its stake in Bank ICB,  says Jovent Giovanny, a banking analyst at IndoPremier Equity Research in Jakarta, when contacted by the The Edge Financial Daily. He said the sale is a “win-win” for both ICBFGH and MNC.

MNC is controlled by Indonesian media mogul Hary Tanoesoedibjo, who also owns assets in the finance, coal mining, infrastructure and property development sectors.  The  acquisition of the Bank ICB stake marks his entry into commercial banking.

Although there are no details on the pricing of the transaction, one Indonesian news report speculated that the acquisition value may have been around 281 billion rupiahs, on the assumption of 171 rupiahs per share, which was what Bank ICB was trading at around the time the agreement between the parties was inked.

Giovanny said assuming the offer price was 171 rupiahs a share, this would translate to a price-to-book value of around 1.3 times based on FY12, which is actually a premium compared to the valuation of Bank ICB’s larger peers such as Bank Bukopin or Bank Pan Indonesia, which are traded at 1.4 times and 0.9 times, respectively.

Both ICBFGH and MNC have remained mum on the transaction price. Bank ICB’s stock, which has shed 2.4% so far this year, closed at 164 rupiahs a share yesterday.

ICBFGH  became a major shareholder of Bank ICB following a series of share transfers between 2004 and 2007. The group operates banks in 14 countries, including Albania, Ghana, Tanzania and Laos.

This article first appeared in The Edge Financial Daily, on April 17, 2013.