SINGAPORE'S DBS Group said that the loss of a primary dealer licence in Indonesia would have no impact on its banking operation and its plans to expand in South-east Asia's biggest economy. Last week, Indonesia's finance ministry withdrew DBS Indonesia's primary dealership, which allowed the bank to participate in the ministry's bond auctions.
The licence was granted only at the beginning of the year, a bank spokesman said.
'While the impact on earnings is not material, we regard the loss as a matter of utmost concern,' said Mr Scott Armstrong, president director of DBS Indonesia in a statement.
Indonesia accounts for only a small portion of the bank's net profit. In the last financial year South and South-east Asia including Indonesia and India accounted for about 6 per cent of profit. DBS did not provide a separate breakdown for Indonesia.
DBS, which earns 90 per cent of its net profit from Singapore and Hong Kong, said the Indonesian ministry cited the bank's inability to fulfil licensing requirements in spite of three reminder letters in the past year.
The bank said on Monday it had initiated necessary actions to meet its obligations as a primary dealer and is in talks with the Indonesian authorities.
DBS Indonesia was among 15 banks and securities firms which had a primary dealer licence in the country.
South-east Asia's biggest bank by assets, said it has opened five new branches in Indonesia, extending its footprint to 13 branches and sub-branches in seven cities: Jakarta, Bandung, Semarang, Surabaya, Medan, Pekanbaru and Makassar.
DBS said further expansion plans in South-east Asia's biggest economy remain on track.
Shares of DBS opened flat at $20, but they are down 11.5 per cent this year, compared with a gain of 13.8 per cent on the Straits Times Index.
The fall has been triggered by fears that the bank may suffer mark-to-market losses on its portfolio of collateralised debt obligations amid small exposure to the US subprime market. -- REUTERS
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