PT Bank BNI plans securitization of nonperforming loans<\/p>\n
JAKARTA (JP): Publicly listed state-owned PT Bank Negara
\nIndonesia (BNI) plans securitization of its nonperforming loans
\n(NPL) as part of its efforts to reduce its NPL ratio to the
\nmaximum limit of 5 percent later this year, as set by the central
\nbank.<\/p>\n
BNI president Saifuddien Hasan said that under the plan, BNI
\nwould issue commercial papers to replace a portion of its NPL. In
\nreturn, investors receive payments from the owners of the NPL.<\/p>\n
Hasan said that BNI's NPL, worth Rp 7 trillion (about
\nUS$615.92 million), had led to an NPL ratio of 24.9 percent, way
\nabove the 5 percent limit allowed this year under Bank Indonesia
\nregulations.<\/p>\n
The NPL ratio measures a bank's nonperforming loans -- loans
\nwhose principal and interest payments have been overdue for more
\nthan three months -- against its total loans.<\/p>\n
Hasan admitted that reducing the NPL ratio from 24.9 percent
\nto 5 percent within this year was a tall order.<\/p>\n
\"We're actually pessimistic about meeting that target, we'll
\njust have to try our best,\" he told reporters following the
\nbank's annual shareholders meeting.<\/p>\n
With only six months left to achieve the target, Hasan said
\nthe bank had still to work out the details of the securitization
\nplan.<\/p>\n
He declined to say how much of the Rp 7 trillion in NPL BNI
\nplanned to securitize, or the type of commercial papers it would
\nissue.<\/p>\n
Securitization could be either through bonds, floating rate
\nnotes, or intermediary notes, he said.<\/p>\n
Despite the short time remaining, Hasan said early
\ncalculations estimated that achieving an NPL ratio of 5 percent
\nthis year was possible.<\/p>\n
\"It will largely depend on the economic conditions. If they
\ndon't deteriorate then it's possible,\" he said.<\/p>\n
He said economic conditions determined the debtors' corporate
\nperformance and hence their debt servicing ability.<\/p>\n
Aside from securitization, BNI also plans to unload another
\nportion of its NPLs through an asset management credit (AMC)
\nunit.<\/p>\n
He said this wholly-owned subsidiary will be tasked with
\nrestructuring the NPLs and selling them to distressed debt
\ninvestors.<\/p>\n
The task equals that of the AMC unit at the Indonesian Bank
\nRestructuring Agency (IBRA), which takes over NPLs from local
\nbanks.<\/p>\n
To replace the NPLs, IBRA has injected the local banks with
\ngovernment bonds under the bank recapitalization program. The
\nscheme allows banks to maintain the required minimum capital
\nadequacy ratio (CAR) of 4 percent.<\/p>\n
CAR measures a bank's capital against its risked weighted
\nassets, which include loans.<\/p>\n
Under the recapitalization program, the government via IBRA
\nhas issued more than Rp 406 trillion worth of bonds to four
\nstate-owned banks and over 20 private banks.<\/p>\n
Last year alone, IBRA took over Rp 13.9 trillion in NPLs from
\nBNI. IBRA injected BNI with Rp 61.8 trillion in government bonds,
\npropping its CAR to around 14 percent.<\/p>\n
Later, an independent due diligence by Arthur Anderson
\nconcluded that the bonds issued for BNI were Rp 630.6 billion
\nlarger than they should be.<\/p>\n
Hasan said BNI planned to return the excess bonds to the
\ngovernment, and pay back another Rp 34 billion in interest
\npayments earned from these bonds.<\/p>\n
He said BNI's shareholders approved the plan, but the bank had
\nto await a response from its creditors.<\/p>\n
\"They (creditors) have 60 days to respond after we announce
\nthe plan tomorrow (Tuesday),\" he said, adding that if one or more
\ncreditor insisted on rejecting the plan, the court would have the
\nfinal say.<\/p>\n
For this year, Hasan said the bank plans to extend loans worth
\nat least Rp 3.4 trillion, lower than last year's lending of Rp
\n4.2 trillion.<\/p>\n
As of May the bank had already channeled some Rp 2.7 trillion
\ninto new loans, he added. (bkm)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/pt-bank-bni-plans-securitization-of-nonperforming-loans-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}