Scam torpedoes BNI profit<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
Net profits at the publicly-listed Bank Negara Indonesia
\n(BNI), the country's second largest bank in terms of assets,
\nplunged by 45 percent in the first nine months of this year due
\nto a huge loan scandal.<\/p>\n
BNI president Saifuddien Hasan said that net profit fell to Rp
\n1.17 trillion (US$138.46 million) from Rp 2.10 trillion in the
\nsame nine-month period of last year as the management decided to
\nset aside a huge loan-loss provision against potential losses
\nfrom the scandal.<\/p>\n
\"The decline in our net profit is mostly attributable to the
\ngraft case,\" said Saifuddien at a press briefing on Thursday.<\/p>\n
He said that the bank set aside a provision of Rp 941 billion
\nto cover the loss. This is about half of the Rp 1.7 trillion
\nallegedly embezzled from the state-owned bank.<\/p>\n
He also said that although the bank had set aside loan-loss
\nprovisions, the bank would work hard to recover the loans.<\/p>\n
The BNI loan scandal centers on the channeling of export
\ncredits without proper appraisals by the bank's Kebayoran Baru
\nbranch in South Jakarta to a number of local companies to finance
\nthe export of commodities to Congo and Kenya. The exporters
\n(Saifuddien identified them as the Petindo Group and Gramarindo
\nGroup) backed up their loans requests with letters of credit
\n(L\/Cs) from banks in Kenya, Switzerland and the Cook Islands as
\ncollateral. It later turned out that the exports never
\nmaterialized, causing BNI to lose the money.<\/p>\n
Shares in BNI have plunged by around 27 percent over the past
\ncouple of days since the case first came to light, although on
\nThursday the share price put on 5.3 percent to close at Rp 100
\nper share.<\/p>\n
Although analysts have said that the lending scandal could
\nseriously undermine confidence in the country's banking sector,
\nwhich was been badly hurt by the late 1990s banking crisis due to
\nchronic corruption, the government's efforts to sell stakes in
\nlocal banks have so far not been affected.<\/p>\n
The Indonesian Bank Restructuring Agency (IBRA) has just
\ncompleted the sale of a majority stake in Bank Internasional
\nIndonesia to a Singapore-South Korean consortium, and the planned
\ninitial public offering of state-owned Bank Rakyat Indonesia was
\nreported to be 14 times oversubscribed due to strong demand from
\ninvestors. The government is planning to sell a further stake in
\nBNI next year.<\/p>\n
Reports quoting government officials said that a shareholders
\nmeeting of BNI would be held in December, in which part of the
\nagenda would be the possible dismissal of top executives of the
\nbank due to the scandal.<\/p>\n
But the BNI board of directors has so far denied
\nresponsibility for the scam.<\/p>\n
Saifuddien acknowledged that scandal was caused by weak
\nsupervision in the bank, and possible collusion between certain
\nofficials of the bank's Kebayoran Baru branch and the companies
\nconcerned.<\/p>\n
He said between December 2002 and July 2003, some $157.4
\nmillion and 56.1 million euros in loans were channeled in 105
\ntransactions without any formal assessments being conducted or
\nchecks made (the above mentioned foreign banks were not BNI
\ncorrespondent banks).<\/p>\n
\"At that time, the board of directors did not know that there
\nwas a huge amounts in export credits being extended by one of our
\nbranches,\" he said.<\/p>\n
Meanwhile, after a meeting with BNI management, Jakarta Stock
\nExchange president Erry Firmansyah said that the bourse had
\nordered BNI to submit a weekly written report on the progress of
\nthe bank's efforts to recoup the loans. But the JSX would not
\nsuspend BNI's shares.<\/p>\n
The police confirmed this week that they had detained two
\nsenior executives of BNI in connection with the scandal, and more
\ndetentions would likely follow.<\/p>",
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