Laksamana.Net – Divestment of the country's largest banks may not proceed as the government or the central bank plan as Bank Negara Indonesia (BNI) gears up to expand through a merger and push for the retrieval of funds stolen last year.
State-owned Enterprises Minister Laksamana Sukardi said last week that the government had decided against a proposal by state-owned BNI to merge with Bank Permata, which was formed by the government two years ago from five troubled banks to create a single institution with assets of some Rp30 trillion.
Sukardi's statement came after the Consultative Group on Indonesia (CGI) warned against more mergers of state-owned banks at its bi-annual meeting two weeks ago.
The government moved to reinforce its commitment to fully privatizing Bank Permata and named ABN Amro as the financial adviser for the planned sale of a 71% stake. The government plans to sell its remaining stake of around 20% on the market later this year.
Prior to ABN Amro's appointment, BNI president Sigit Pramono said the bank would accept the government's decision on the merger plan, reported The Jakarta Post.
But BNI deputy director Arwin Rasjid told reporters on Thursday that the bank was still considering entering a bid for Bank Permata when it goes on the market. He said the bank was looking into credit and capital adequacy ratio (CAR) regulations to determine if BNI can lawfully take part in the Permata divestment, reported detikcom.
The timetable for the Permata divestment remains unclear but should wind up by the end of the year, with road shows to be launched in late July.
Mohammad Syahrial, chief of the government-owned assets management agency PT Perusahaan Pengelola Aset (PT PPA), which oversees Bank Permata, said 19 foreign and local consortia have so far expressed interest in buying the stake.
Bisnis Indonesia quoted banking sources two weeks ago stating that HSBC and Standard Chartered are expected to submit offers following the appointment of a financial advisor for the divestment.
Meanwhile, BNI managers told the Far Eastern Economic Review that their proposal to merge with Permata faced resistance because the central bank, Bank Indonesia (BI), would prefer Bank Mandiri to swallow BNI.
A BI spokesman denied any specific merger plans and said that "it is up to bank owners to decide who to merge with."
A merger of the country's two largest banks in terms of assets would bring the government one step closer to launching its first regional bank.
The central bank requires a capital base of Rp50 trillion ($6 billion) for a bank serving Southeast Asia, while Mandiri's capital base stands at only Rp20 trillion.
The depressed state of the market and the falling currency are fuelling speculation about the future of both banks and have delayed the banks' cash-raising plans.
The government put plans to sell a 10% stake in Bank Mandiri on hold, while BNI has delayed a plan to issue $300 million in bonds.
The government, which has a 99.12% stake in BNI, plans to sell a 30% stake in the bank in the third quarter of this year.
Zero recovery rate on scandal
Meanwhile, BNI's Pramono told reporters that the bank has yet to lay its hands on any of the assets purchased with funds stolen in the banking scandal that rocked the industry late last year.
Of the Rp1.7 trillion ($201 million) stolen in the fictitious letter of credit scam, police and prosecutors have tracked down around Rp1.3 trillion in 12 assets in the form of cash deposits, property, land, factories and other assets.
However, the authorities have only closed on Rp80 billion in assets, Pramono said after meeting House legislators on Thursday, reported detikcom.
He said the bank had hired a new legal team to push for the speedy recovery of the funds although it was wary of disturbing investigators and prosecutors working on the fraud case.
Head of House Sub-Commission IX on banking, Anthony Zedra Abidin, was less diplomatic when he faced reporters after the session with BNI and Bank Indonesia representatives. He said the Commission would call all parties associated with the investigation of the scandal including the police, prosecutors and BNI and BI managements to get to the bottom of their dismal performance in retrieving the funds.
He said the Commission was also concerned that the legal process was running off the rails, as only BNI employees involved in the fraud remained in police custody, reported Bisnis Indonesia.
Wealthy businessmen Adrian Waworuntu and Jeffrey Basso, although remaining prime suspects in the case, had been released, he said.
BNI's performance plummeted last year after it was forced to allocate Rp1.2 trillion to cover the funds allegedly channeled to companies controlled by Waworuntu and Basso, among others.
As a result of the drain on bank funds, BNI's profit slumped from Rp2.5 trillion in 2002 to just Rp419 billion in 2003.
Pramono reiterated last week that the scandal would not impact on the bank's performance this year.
BNI credit plans The bank released new information on lending last week revealing that business is picking up.
BNI deputy director Arwin Rasjid said the bank expects net interest income to grow 20% in 2004 due to an increase in lending and that BNI hopes to channel up to Rp12 trillion in new loans this year.
He said the bank's net interest income in the first quarter of this year rose 54% on year to Rp1.65 trillion, reported Dow Jones Newswires. As of March 31, BNI's total outstanding loans stood at Rp47.7 trillion – up from Rp46.4 trillion at end-December.
State banks' NPLs reach Rp9T In more state-owned banking news, the Ministry for Cooperatives and Small and Medium Enterprises told the House last week that nonperforming loans (NPLs) at the country's four largest state-owned banks totaled Rp8.97 trillion as of February this year.
Minister Ali Marwan Hanan said the figure was well down on the Rp12.876 trillion in NPLs held by 514,898 debtors recorded as of July 2002 at BNI, Bank Mandiri, Bank Tabungan Nasional (BTN) and Bank Rakyat Indonesia (BRI).
BRI holds the largest chuck of NPLs, with Rp2.72 trillion locked in loans to 984 debtors, followed by BNI, with Rp2.53 trillion in 35,931 bad loans. Bank Mandiri recorded NPLs of Rp1.28 trillion in 586 accounts, while BTN listed Rp1.4 trillion in NPLs held by 1,405 debtors, reported detikcom.