Government issues higher coupon rate bonds<\/p>\n
JAKARTA (JP): The government announced on Wednesday that it
\nwould issue new bonds carrying a higher coupon rate that could be
\nexchanged with some of the lower interest rate bonds held by the
\nrecapitalized banks.<\/p>\n
Director General of Financial Institutions Darmin Nasution
\nsaid that the new policy was aimed at making the recapitalization
\nbonds more attractive to investors.<\/p>\n
\"The banks will be given until (next) Thursday to decide
\nwhether they will subscribe to the new bonds,\" Darmin told
\nreporters during a break in a meeting with the joint government-
\nlegislature state budget committee.<\/p>\n
He said that only the recapitalization bonds carrying a fixed
\ninterest rate of 12 percent and maturity period of five years
\ncould be exchanged with the new bonds carrying an interest rate
\nof 16 percent and 10 percent.<\/p>\n
He said that under the new plan, the banks would be allowed to
\nexchange 30 percent of the outstanding recapitalization bonds
\nwith the higher interest rate bonds, and the remainder with the
\nlower rate bonds.<\/p>\n
Darmin said that the combination of higher and lower interest
\nrate bonds would not increase the government's bond interest
\npayment in 2001, which is estimated to reach Rp 55.6 trillion.<\/p>\n
The government has completed the bank recapitalization program
\nby injecting bonds into recapitalized banks rather than injecting
\nfresh capital. The government has issued about Rp 450 trillion in
\nbonds carrying a combination of fixed and variable interest
\nrates.<\/p>\n
The balance sheet of most of the recapitalized banks are
\ncurrently burdened with government bonds instead of productive
\nloan assets.<\/p>\n
The government initially expected the recapitalized banks
\ncould sell the bonds on the secondary market to raise cash to
\nfinance lending activity, but it turned out that not many
\ninvestors were interested in purchasing the bonds except at a
\ndiscount.<\/p>\n
One reason was due to the fact that the interest rate of the
\nfixed rate bonds was lower than the interest rate of the Bank
\nIndonesia SBI promissory notes currently hovering above 14
\npercent.<\/p>\n
Up to the end of August, sales in the secondary government
\nbond market was only about Rp 9.3 billion.<\/p>\n
Danamon<\/p>\n
Separately, Bank Danamon president Arwin Rasyid said on
\nWednesday that the bank welcomes the new government policy which
\nwould make it easier to sell the bonds, raise cash and resume
\ntheir intermediary function.<\/p>\n
\"We welcome the new policy,\" he told a press conference
\nintroducing the bank's new management team appointed at the
\nrecent shareholders meeting.<\/p>\n
He said that the bank was still awaiting the details of the
\nnew policy.<\/p>\n
Elsewhere, Arwin said that publicly-listed Danamon booked a
\nthird quarter net profit of Rp 160 billion compared to Rp 13
\nbillion in June on the back of a significant increase in net
\ninterest margins.<\/p>\n
He said that full year net profit was expected to reach more
\nthan Rp 250 billion.<\/p>\n
Bank Danamon, which was nationalized by the government in
\n1998, holds around Rp 47 trillion worth of government bank
\nrecapitalization bonds. The bank was merged with eight other
\nsmaller banks in June.<\/p>\n
Arwin said that interest income as of September was Rp 3.1
\ntrillion largely received from government bank recapitalization
\nbonds.<\/p>\n
He said that the bank's new lending in the third quarter was
\nonly Rp 1.3 trillion, increasing the total lending portfolio to
\nRp 5.7 trillion.<\/p>\n
Arwin said that the level of non-performing loans (NPL) as of
\nSeptember was 19 percent, down from 26 percent in June. He said
\nthat the average NPL level of the recapitalized banks was 20.7
\npercent.<\/p>\n
He said that the bank's net open position in September was
\n45.1 percent but it had now dropped below the 20 percent limit
\nset by Bank Indonesia.<\/p>\n
He said that the bank's capital adequacy ratio (CAR) was at
\n37.1 percent at the end of September compared to the average CAR
\nlevel of the recapitalized banks of 10.1 percent.<\/p>\n
The bank's new management team includes old and new faces.
\nThe new faces are Krishna Suparto, a former executive from the
\nnow defunct Bank Putera, in charge of corporate loans, and Gatot
\nSuwondo from Bank Duta in charge of the commercial and remedial
\ndivision. The old faces are Armand Arief in charge of consumer
\nbanking, Safrullah Saleh as finance director, Ria Sidabutar as
\ncompliance director, and Muliadi Rahardja in charge of technology
\nand IT.(rei)<\/p>",
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