DBS GROUP Holdings is likely to make an acquisition in Asia to make revenue from the region a far higher proportion of its overall business.
Revenue from the Asian region comprises about 10 per cent of revenue now, but acquisitions are seen as a way of lifting that to 30 per cent over the next five years.
Indonesia's PT Bank Danamon, whose controlling shareholder is Temasek Holdings, would be a prime candidate, analysts say.
The speculation comes on the heels of new DBS chief executive Piyush Gupta's first interaction with the media and analysts on Friday.
Mr Gupta told the results briefing that he wants to re-energise its operations in Hong Kong, focus on building a full-service relationship with its POSB customers and establish a leading small and medium-sized enterprises franchise.
He signalled a significant policy shift by moving the bank's focus so that South and South-east Asia - Singapore excluded - would account for 30 per cent of its revenues in five years.
It wants Greater China to contribute the same, with Singapore's share dropping to 40 per cent from 60 per cent.
Analysts say that DBS needs to make an acquisition in order to expand its business beyond its domestic borders within the timeframe indicated.
'One of the takeaways from the briefing was the possibility of DBS looking at South and South-east Asia for deals,' said JPMorgan analyst Harsh Modi.
'The aim... cannot be possible without a deal in South and South-east Asia as contribution from this segment is close to 10 per cent.'
Analysts say an Indonesian bank purchase would take DBS closer to its target numbers.
Strong domestic demand shielded Indonesia from the global economic recession last year and the populous country is tipped by some analysts to grow by 5.5 per cent this year and 6.5 per cent next year.
Furthermore, margins among the top Indonesian banks are much higher than those in Singapore, say analysts.
Nomura analyst Anand Pathmakanthan said the real 'broad-based growth' for DBS would be harder to come by in India, as the local lender faces restrictions on the number of branches it can open.
The Temasek-controlled Danamon, the fifth-largest commercial bank in Indonesia, is one possible target.
RBS analyst Trevor Kalcic said growth in Indonesia makes complete sense, and acquiring Danamon also makes sense if done at the right price.
'There is very little else of quality available, while South Korean and Indian banks have also repeatedly been quoted in the Indonesian press as looking to make acquisitions in Indonesia, which narrows the field further,' Mr Kalcic said.
A foreign analyst who requested anonymity said the Temasek parentage would be a factor for DBS to consider in any Indonesian purchase.
'In the case of DBS, they are handicapped by the fact that Temasek is already in Indonesia,' the analyst said.
'I remember when Jack Tai (DBS' former CEO) was around, DBS looked at Korea Exchange Bank and - if I can paraphrase him - he said he was specifically told that DBS is already in Korea, as Temasek has a presence there through Hana Bank.'
Temasek owns a stake in Hana Financial Group, whose unit Hana Bank is South Korea's No. 4 lender.
'So in the same way, when DBS goes to the Indonesian regulator and says that I'm interested in some other bank in Indonesia, the regulator is going to say, 'you are already here'.'
The analyst added that Temasek should sell Danamon to DBS and Temasek will then own Danamon via DBS.
'It's the easiest arranged marriage,' he said.
Temasek sold its stake in Bank Internasional Indonesia two years ago to comply with a central bank rule that bars foreign investors from owning more than one bank in Indonesia.
gabrielc@sph.com.sg
LOOKING TO THE REGION
'The aim... cannot be possible without a deal in South and South-east Asia as contribution from this segment is close to 10 per cent.'
JPMorgan analyst Harsh Modi