KUALA LUMPUR: A possible move by the Indonesian central bank to cap foreign ownership in banks would affect CIMB Group Holdings Bhd more than Malayan Banking Bhd (Maybank), says an ECM Libra Investment Research analyst yesterday.

Current rules in Indonesia make it possible for foreigners to hold up to a 99.9 per cent stake in banks. Those rules, however, are being reviewed.

A recent news report quoted Indonesian central bank spokesman Difi Ahmad Johansyah as saying that it is studying the possibility of limiting majority ownership in Indonesian banks.

Although the review is ongoing, the new regulation limiting majority share ownership for national banks is expected to be implemented in the fourth quarter this year and foreign ownership could be limited to less than 50 per cent.

The implementation of this regulation could be potentially negative for CIMB and Maybank as it could force the banks to dispose of their stakes and dampen their earnings prospects, said ECM Libra's Bernard Ching.

CIMB owns close to 97 per cent of Bank CIMB Niaga, while Maybank owns 95 per cent of Bank International Indonesia (BII).

Of the two banks, Ching believes that CIMB would be more severely impacted given Bank CIMB Niaga's large contribution to the group's bottom-line and future expectations for it to remain as its key earnings driver.

Some 27.2 per cent of CIMB's profit before tax (PBT) in the first quarter of this year came from its Indonesian arm, while only 4 per cent of Maybank's PBT came from BII.

Other Malaysian banks could also be caught by a change in regulation in Indonesia.

RHB Capital Bhd, for instance, has been wanting to buy 80 per cent of a small Medan-based lender, PT Bank Mestika Dharma, for some RM1.16 billion since October 2009.

Affin Holdings Bhd, too, could be affected as it looks to complete its purchase of a controlling stake in Indonesia's Bank Ina Perdana by the end of this year.

"These banks may back out of their deals or re-negotiate on price if this rule is implemented," said an analyst from a foreign research firm here.

Still, there is much uncertainty surrounding this possible new regulation and how it may be implemented, if at all.

"Nonetheless, we remain cautiously optimistic that the new regulation may not be applied retroactively given the difficulties in implementing the policy without potential backlash from foreign investors," Ching said in a report released yesterday.

Analysts pointed out that banks such as Maybank, which had been criticised for paying a hefty price to acquire BII in 2008, would certainly be upset if they had to cede control.

ECM Libra and other research houses have, for now, not made any adjustments to their earnings model for Malaysian banks due to the uncertainties surrounding the issue.

ECM Libra maintained its "hold" calls on both CIMB and Maybank.