Abu Dhabi Islamic Bank (ADIB), the largest Islamic bank in Abu Dhabi, is reportedly in negotiations to purchase a minority stake in Bank Syariah Indonesia (BSI), Indonesia’s leading Islamic lender, for approximately USD 1.1 billion. The purpose of the acquisition is to gain entry into the rapidly expanding Southeast Asian market.
Abu Dhabi Islamic Bank is looking at options, including possibly purchasing a 15% stake in Bank Syariah Indonesia from Bank Rakyat Indonesia, Reuters reported.
After the report, while the ADIB shares ended down 5.7%, the value of BSI shares increased by up to 50.6% to 2,620 rupiah. According to LSEG data, the lender’s shares have increased by 50% year to date, valuing a 15% stake at USD 1.05 billion and giving it a market cap of about UDD 7 billion.
“What we can say is that the information above is in the domain of our shareholders,” State-owned BSI’s corporate secretary Gunawan Hartoyo responded in a statement to a question about whether ADIB was in talks to look into the possibility of investing in BSI or purchasing BRI’s 15% stake.
As per the reports, discussions and negotiations are still in their early phases, and there is no assurance that a deal will be signed.
A rapidly expanding market for Islamic banking is Southeast Asia, a region comprising 11 countries and home to over 500 million people. A major Muslim population in the world resides in Indonesia, the largest economy in the region.
According to the Islamic Finance Development Report released by Indonesia’s financial services authority (OJK) in 2023, the country’s Sharia financial assets were valued at USD 163 billion in July of last year, up 13% from the same month in 2022.
BSI has been extending its reach throughout the Middle East, having established a representative office in the Dubai International Financial Centre in early January 2022 and received approval in 2023 August to become a full branch.
According to its website, the bank hopes to open a branch in Saudi Arabia after seeing a large number of Hajj and Umrah pilgrims from Indonesia.
In order to create one of the top 10 Islamic banks in the world, Indonesia merged PT Bank Syariah Mandiri, PT Bank BNI Syariah, and PT BRI Syariah Tbk to form BSI in 2021, according to its website.