Don't put high hopes in new BCA owner: Experts<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Hopes are riding high that the completion of the Bank Central
\nAsia (BCA) sell-off will provide a boost for the recovery of the
\ncountry's still-ailing banking sector, although analysts say
\nthere could still be a long road to travel before such hopes
\nbecome reality.<\/p>\n
The government last week named the Farallon-led consortium as
\nthe winning bidder for the government's 51 percent stake in BCA,
\nthe country's largest retail bank.<\/p>\n
Farallon, a U.S. investment firm, beat another consortium led
\nby Britain's Standard Chartered Bank Plc., which was initially
\ntipped to win the bid because of its strong banking expertise and
\ninternational reputation.<\/p>\n
Selling BCA to a credible foreign investor would not only
\nprovide money for the cash-strapped government, but could also be
\nexpected to help turn the bank around so that it could become a
\nlocomotive for the revival of the local banking industry, saddled
\nas it is with huge quantities of government bonds and the
\ninability to resume lending to the real sector.<\/p>\n
However, Indef (Institute for Development of Economics and
\nFinance) banking analyst Drajat Wibowo poured cold water on the
\noptimism, arguing that the top priority for Farallon as an
\ninvestment company would be to seek capital gain from its
\ninvestment in BCA, not to boost the bank's role in revitalizing
\nthe banking industry.<\/p>\n
The government took over BCA from its founding owner, the
\nSalim Group, in the wake of the 1997 regional financial crisis,
\nand issued billions of dollars in bonds to help the bank stay
\nafloat. The state budget now has to cover the interest on these
\nbonds, amounting to between Rp 6 and 7 trillion (about US$700
\nmillion) each year in the case of BCA alone.<\/p>\n
Drajat also said that based on Farallon's business plan for
\nBCA, the investment firm had no clear strategy on how to unload
\nthe massive amount of government bonds held by the bank so as to
\nenable it to increase loans to the business sector.<\/p>\n
The bank's loan-to-deposit ratio last year was only about 17.5
\npercent, meaning that its income still depended largely on the
\ninterest on the government bonds, not on normal lending
\noperations.<\/p>\n
State Minister for National Development Planning Kwik Gian Gie
\nhad opposed the BCA sale program, arguing that it was not logical
\nto continue paying taxpayers money to a bank owned by a foreign
\ninvestor.<\/p>\n
University of Gadjah Mada (UGM) economist Sri Adiningsih also
\nhas her doubts.<\/p>\n
\"What's hoped for from the new BCA (foreign) owner is that it
\nwill improve the performance of the bank, make it more efficient
\nand gradually turn it into a world-class bank.<\/p>\n
\"But, that's only hope. It still needs to be proved whether
\nFarallon can perform as expected,\" Sri said.<\/p>\n
She said that being an investment company, it was unlikely
\nthat Farallon would have a long-term commitment to BCA.<\/p>\n
Elsewhere, Drajat said that the appointment of Deutsche Bank
\nAG as a technical adviser to the Farallon-led consortium was
\nmerely meant to strengthen the position of the investment firm in
\nits BCA bid because of Deutsche Bank's close relationship with
\nthe International Monetary Fund, which is providing a
\nmultibillion dollar bailout facility for the country.<\/p>\n
\"I think the appointment of Farallon as the winner had
\nsomething to do with the strong lobbying of Deutsche Bank with
\nthe IMF. And as the Paris Club (meeting) is nearing, in which the
\nIMF's support is very important, Indonesia decided to choose
\nFarallon instead of StanChart.\"<\/p>\n
Former IMF Asia Pacific deputy director Hubert Neiss, who led
\nthe IMF team in Indonesia in the early period of the crisis, is
\nthe chairman of the Deutsche Bank's Asia operation.<\/p>\n
BCA is potentially a good bank with more than 8 million
\naccounts, 800 branches, over 2,100 ATMs and total assets of
\nalmost Rp 100 trillion as of last year.<\/p>\n
Farallon business plan for BCA
\n - No major changes in terms of policies
\n - No layoffs for the next two years
\n - Deutsche Bank to be hired to manage BCA
\n - Increasing BCA's corporate, commercial loans to
\nRp 21 trillion from estimated Rp 15.6 trillion this year
\n - Increasing retail loans to Rp 10.5t in 2005 from Rp 4.6t this
\nyear
\n - Increasing pre-tax profit to Rp 5.4t in 2005 from Rp 3.2t this
\nyear<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/dont-put-high-hopes-in-new-bca-owner-experts-1447893297",
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