Merger Talks of Indonesia's Sharia Banks

Minister of State Owned Enterprises, Erick Thohir, had his plan to merge several state owned Islamic banks approved by the monitoring institution, OJK, along with the corresponding stakeholders. This merger value will produce a new Islamic bank entity with an estimated total assets of IDR 207 trillion, under the coordination of the state-owned bank association (Himbara). The merge will include three commercial banks: PT Bank BRISyariah Tbk (BRIS), PT Bank BNI Syariah, and PT Bank Syariah Mandiri. Furthermore, Erick’s purpose for the merge was mentioned as he said, "Then why do I want a sharia merger, because Indonesia, which has the largest Muslim population, does not have that facility. Now, if the state-owned islamic banks are merged, it can become the top bank for people's alternative choices." This claim is further strengthened upon the fact that compared to Malaysia where the penetration of Islamic banking have reached a whopping 40% -50%, Islamic banks in Indonesia have only reached 8.5%-9%. It is also quite abnormal where Indonesia have yet to own an Islamic bank powerhouse, not even one in the top 20 of the world, despite being the largest Muslim populated country.

The proposal of this merger has been well-received by the banks in question. The Director of Mandiri Sharia, Toni EB Subari, expressed his support in the virtual press conference on (8/25), stating that Mandiri Group is fully onboard with the Ministry of State-owned Enterprises (BUMN)'s merger plan. He believes that its realization will maximize the economic potential of Sharia banking in the financial industry. Besides, this merger is hoped to propel Mandiri Sharia into the Top 10 national banks. Any other way, on (8/24), BRI Sharia Director Yana Soeprianan asserted that whether or not to support the merger is the authority of their major shareholder, the government. However, he affirmed that BRI Sharia would continue to focus on improving its output and performance while staying in compliance with the government's programs, including this merger.

The late merger's news brought incredibly positive sentiments toward Bank Rakyat Indonesia's subsidiaries, PT Bank BRI Syariah (BRIS), and Bank Rakyat Indonesia Agroniaga (AGRO) shares. Following the opening of trade on Wednesday (8/26), BRIS shares rocketed as much as 15.07% from its opening at 820. BRIS had notably peaked at an astounding level of 890 before closing at the all-time highest level at 865 since its initial public offering (IPO) in early May 2018. In line with the surge in BRIS, AGRO also impacted significantly, which they shot up for almost 12.4% to close at 380, making them one of IHSG's top gainers on the same date. Top three gainers for IHSG are BRIS, PT Delta Dunia Makmur (DOID), which surges for a tremendous amount of 9.35% on early Wednesday, and followed by AGRO. Besides the late news on the merger, one of the sentiments is the company's positive performance, as indicated by BRIS reporting their impressive net profit growth in the second quarter of 2020, amounting to 229.6% when compared to last year. Additionally, the surge in BRIS and AGRO also driven by the placement of government funds and also attempts to convert main assets in the context of implementing Qanun for Islamic Financial Institutions in Aceh by the end of 2020. Overall, the Islamic State Owned Enterprise merger not only encourages the development of the Sharia economy in Indonesia but also becomes a positive sentiment in the financial perspective.

Sources:

CNBC Indonesia

Kompas

The Jakarta Post

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