Recapitalized banks show strong results<\/p>\n
JAKARTA (JP): Nine private banks which have been recapitalized
\nby the Indonesian Bank Restructuring Agency (IBRA) have shown
\nstrong performance during the first half of this year, according
\nto the agency's deputy chairman, Jerry Ng.<\/p>\n
But Jerry said on Thursday that despite the improvement in key
\nindicators, the banks were not out of the woods yet.<\/p>\n
\"In general, all IBRA banks are moving on the right track with
\nimprovements in key indicators during the first half,\" he told a
\nmedia conference.<\/p>\n
\"But we must remain alert because the problems are not yet
\nover,\" he added.<\/p>\n
Jerry dismissed criticism that the recapitalized banks had not
\nyet resumed lending to the real sector, pointing out that the
\nnine IBRA banks had channeled more than Rp 6 trillion (US$662.98
\nmillion) in new lending between January and May.<\/p>\n
\"This is an 18 percent growth compared to the level in
\nDecember last year,\" he said.<\/p>\n
The nine private banks which have been recapitalized by IBRA
\nincluded the publicly listed Bank Lippo, Bank Internasional
\nIndonesia, Bank Universal, Bank Danamon and Bank Central Asia,
\nand private Bank Bukopin, Bank Arta Media, Bank Patriot and Bank
\nPrima Express.<\/p>\n
IBRA has recapitalized 10 banks, including publicly listed
\nBank Niaga in June. The agency is expected to recapitalize
\npublicly listed Bank Bali in October, which would mark the
\ncompletion of the country's bank recapitalization program.<\/p>\n
The recapitalization program is aimed at boosting the banks'
\ncapital adequacy ratio (CAR) to beyond the minimum 4 percent
\nlevel.<\/p>\n
In addition to the private banks, the government has also
\nrecapitalized four state banks. Nine smaller private banks have
\nbeen incorporated into Bank Danamon, prompting the government to
\nfinance the second recapitalization of Danamon to maintain its
\nCAR above the minimum requirement.<\/p>\n
Jerry said that the average CAR level as of June was about
\n10.35 percent.<\/p>\n
He said that between January and May, the assets of the
\nrecapitalized banks increased 17 percent with deposits up 8
\npercent while nonperforming loans (NPLs) decreased from 30
\npercent to 27.5 percent.<\/p>\n
Jerry said, however, that the banks were still being plagued
\nby other problems, including assets held up mostly in government
\nbonds, a low loan to deposit ratio (LDR) of only about 43 percent
\nand the necessity of accelerating loan restructuring.<\/p>\n
\"The balance sheets of the banks are still mostly filled with
\ngovernment bonds,\" he said.<\/p>\n
The government, via IBRA, a unit of the finance ministry,
\ninjected bonds instead of cash into the banks to finance the
\nrecapitalization program. The banks will receive cash from the
\ninterest rate of the bonds.<\/p>\n
Jerry said that Minister of Finance Bambang Sudibyo's idea of
\nswapping part of the recapitalization bonds for performing loans
\nunder IBRA, if realized, would aid the improvement of the balance
\nsheets.<\/p>\n
He pointed out that the interest rate of the bonds was now at
\nabout 12 percent, while the interest rate of bank loans was about
\n16 percent.<\/p>\n
Bambang said earlier this week that the government was still
\ndesigning the new policy.<\/p>\n
He said that the total recapitalization bonds by October would
\namount to about Rp 430 trillion, and that was expected to be
\nhalved by swapping them for the IBRA loans.<\/p>\n
IBRA now controls about Rp 250 trillion in NPLs. The agency is
\nmandated to restructure the loans to make them performing loans
\nagain.<\/p>\n
Jerry said that an improvement in the bank's balance sheets
\nwould be one way of lifting the current low LDR.<\/p>\n
Indonesian banks were badly hit by the financial crisis that
\nstarted in the middle of 1997. The government has closed down
\nsome 49 banks and has issued bonds worth more than Rp 600
\ntrillion to finance the bank recapitalization and restructuring
\nprogram.<\/p>\n
Jerry said that the future landscape of the country's banking
\nsector would consist of less than 10 large banks, dozens of
\nsmall- to medium-size banks, and foreign banks.<\/p>\n
He said that the current number of about 100 banks would
\ncontinue to decline due to mergers and acquisition.<\/p>\n
Jerry also said that the government effectively now controlled
\nbetween 85 percent and 90 percent of the country's banking sector
\nas a result of the recapitalization program.<\/p>\n
The government has provided between 80 percent and 100 percent
\nof the financing needs of the bank recapitalization program.<\/p>\n
\"So the government is in a unique position of designing the
\nfuture landscape of the domestic banking sector,\" Jerry said.<\/p>\n
He said that IBRA planned to seek approval later next month
\nfrom the House of Representatives to divest ownership in four
\nlisted banks, including Bank Central Asia, Bank Niaga, Bank
\nInternasional Indonesia and Bank Universal. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/recapitalized-banks-show-strong-results-1447893297",
"image": ""
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"sponsor_url": "https:\/\/okusiassociates.com"
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