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Family banking, Indonesian-style

If Pramukti Surjaudaja stepped aside as head of his family's Bank NISP in Indonesia, the firm would "run as it is or even better."

If Pramukti Surjaudaja stepped aside as head of his family's Bank NISP in Indonesia, the firm would "run as it is or even better." So says no less astute an analyst than Pramukti Surjaudaja, who doesn't lack for confidence but takes a dispassionate view of the business. "We don't want to depend on anybody," he says, "and we don't want any stars, either."

The 42-year-old Surjaudaja's pragmatism was behind his family's decision last month to substantially reduce its controlling position in Bank NISP by selling a 22.5 percent stake to Singapore's OCBC Bank. The sale will reduce the Surjaudaja family's ownership position to 23 percent and -- unusual for a wealthy Indonesian clan -- cede some of its influence.

Granted, the family got a nice deal: $70 million, a 47 percent premium to the share price and 2.5 times book value. More important, says Surjaudaja, the marriage of his family's $1.8 billion-in-assets bank, the country's 12th largest, to an institution 25 times its size will allow NISP to compete vigorously against foreign rivals moving into Indonesia. OCBC plans to upgrade NISP's risk management and provide its customers with more sophisticated wealth management products as well as access to the Singapore bank's regional network. And "in case of crisis," says Surjaudaja, "we would have a strong partner."

Refusing this opportunity to modernize NISP merely to maintain overwhelming family control "would be unfair for stakeholders, employees and the country itself," says Surjaudaja, whose grandfather founded NISP in 1941. He reasons that a healthy, growing bank creates more value for his family, even if they hold a smaller stake.