London-based lender HSBC is planning to merge its Indonesian branch with Bank Ekonomi Rahardja, its local subsidiary, by 2017.

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HSBC will purchase public shares within Bank Ekonomi for about IDR17.18bn ($1.3m) with the tender offer for the share purchase being scheduled to take place from 5 June to 4 July 2015.

The new entity that will emerge following the merger, which will take 18 to 24 months, will operate as a locally incorporated (PT) firm.

HSBC Indonesia country manager and CEO Sumit Dutta said: "We have gained the OJK’s (the Financial Services Authority) approval for the integration and will be the first foreign bank to integrate its branch with its local subsidiary."

The merger will enable HSBC Indonesia to offer better service coverage and have a larger network in over 30 cities with more staff and customers.

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Dutta said: "Instead of presence in six or seven cities, HSBC customers will enjoy presence in 30 cities."

The bank will also change its business model to serve the needs of both HSBC’s existing corporate customers and the small and medium-sized businesses served by Bank Ekonomi.

Dutta added: "When we become one bank we would like to cater to both types of customers. Will the business model be change? Yes, it will. We will need to modify the business model to make sure it complies with the different infrastructures we have post-integration."