A year after Deutsche Bank advised a United States hedge fund on its takeover of an Indonesian bank, earning the client a 55 per cent return, the German bank is part of a group that is bidding for a smaller such lender.

Deutsche Bank advised Farallon Capital Management on its takeover of Bank Central Asia last year. Now, Deutsche and its partner are trying to buy a stake in Bank Danamon.

Farallon's 55 per cent return came from US$73 million of dividends and the fact the bank's shares are 42 per cent above its purchase price. The bank paid dividends, even as profit fell 19 per cent and costs rose by one-third, thanks to its holdings of government bonds, which account for 80 per cent of assets.

"A dollar made is a dollar made, no matter how you make it, either from holding bonds or from extending loans," said Ho Kok Hua, who holds Bank Central Asia shares as a money manager at APS Asset Management. "Making money from holding bonds is safe."

Indonesia picked the Deutsche group, led by Temasek Holdings, as the preferred bidder for Danamon this week. The government hopes the sale will clear the way for the disposal of six other lenders it seized in 1998 and 1999, helping finance the country's US$4 billion budget deficit.

The banks are in business thanks largely to government bonds they received four years ago. Although Bank Central Asia's loans rose about 46 per cent last year, its loan-deposits ratio was 20 per cent, less than half the industry average in Indonesia. HSBC Holdings lends 73 per cent of its deposits.

Indonesia also plans to sell Bank Mandiri, Bank Rakyat Indonesia, Bank Negara Indonesia, Bank Lippo, Bank Internasional Indonesia and Bank Permata.

Bank Niaga was sold to Malaysia's Commerce Asset-Holding, for 1.05 trillion rupiah (about HK$966 million) in November last year. Commerce Asset was the sole bidder after Australia & New Zealand Banking Group walked away.