Bangkok Bank snapped up a controlling stake in Indonesia's PT Bank Permata for about US$2.7 billion (S$3.65 billion), after DBS Bank and OCBC Bank reportedly backed out of a bid.
The purchase of a near 90 per cent holding from Standard Chartered and a local partner fits with Bangkok Bank's strategy of transforming into a regional lender with a larger presence in South-east Asian markets, according to a filing.
Indonesia is a "highly attractive and fast-growing market", it said.
DBS, OCBC and Japan's Sumitomo Mitsui Financial Group were all said to be vying to buy Bank Permata.
The Indonesian lender's owners were said to be seeking a valuation of more than 1.6 times its book value.
Considered a mid-sized lender, Permata operates over 300 branches in more than 60 cities in South-east Asia's biggest economy.
Indonesia's banking sector, believed to be ripe for consolidation, has more than 100 lenders.
DBS and OCBC reportedly backed out of a bid after conducting due diligence.
The decision not to throw in a bid was deemed positive by Citi analyst Robert Kong in a client note.
This comes as a merger and acquisition (M&A) deal in Indonesia would face "significant challenges", he said.
It would mean a "multi-year rationalisation process" to manage network duplication and squeeze out cost savings, he noted.
Brick-and-mortar M&As would also conflict with Singapore banks' strategy of building digital banks to capture opportunities in Asean, Mr Kong added.
Standard Chartered's disposal of its stake, which will net about US$500 million, comes as no surprise after the bank signalled in February that Permata is no longer core.
The funds may be used to extend the emerging-markets lender's share repurchase programme, which has already returned US$1 billion. Its shares climbed more than 2 per cent in London on Thursday.
Standard Chartered and Jakarta-listed PT Astra International each owned about 44.6 per cent of Bank Permata.
The first major purchase of an overseas lender by a Thai bank is a shift in tactics for Bangkok Bank.
Thailand's second-largest bank by assets has been viewed as conservative. The prospect of the purchase rattled investors, sparking a 4.4 per cent slide in Bangkok Bank's stock by Thursday's close to the lowest level since 2016.
The Thai banking industry faces domestic challenges from an economic slowdown, elevated household debt, deteriorating asset quality and low interest rates.
The Indonesian economy is expanding at more than twice the pace of Thailand's.
The fact that Bangkok Bank is prepared to take on the challenge points to the limited growth opportunities at home, said Mr Kevin Kwek, a Singapore-based analyst at Sanford C. Bernstein & Co.
Trade flows between Indonesia and Thailand are not large enough to justify the deal, and there is not much room for wealth operations in the country, he said.
"It says a lot about Thai opportunity, though, for a Thai bank to look to Indonesia for growth despite obvious challenges."
The Thai government is trying to encourage domestic mergers to make banks bigger and more competitive.
Two lenders, TMB Bank and Thanachart Bank, are combining under that initiative to create the country's sixth-largest lender.
BLOOMBERG, THE BUSINESS TIMES
