Astra bets on Permata to boost auto sales

Astra bets on Permata to boost auto sales

Jakarta, Bloomberg

PT Astra International, Indonesia's biggest automobile distributor, says it's counting on a return to banking after a five-year hiatus to help sell more cars and motorcycles in the nation of 235 million people.

Astra and Standard Chartered Plc, a U.K. bank that makes two- thirds of its profit in Asia, bought 62 percent of PT Bank Permata, Indonesia's seventh-largest lender, since November, paying the government Rp 3.4 trillion (US$366 million).

The investment may boost sales at Astra as two-thirds of the automaker's customers finance their purchases with loans. Banks are the second-best performing industry group in the stock market this year, benefiting from a boom in consumer spending, which accounts for two-thirds of Indonesia's $208 billion economy.

"It's good synergy -- both Astra and Permata will benefit," Astra President Director Budi Setiadharma said in an interview in Jakarta. "Bank Permata specializes in consumer finance and lending to small and medium-sized enterprise while Astra sells consumer products."

Indonesia's economy is forecast to expand 5.5 percent next year, according to government estimates, up from 5 percent in 2004 and 4.5 percent in 2003. Interest rates at six-year lows and three peaceful elections in the year helped boost consumer confidence, lifting corporate profits in Southeast Asia's largest economy.

Permata, which has 1 million customers and 300 branches, doubled net income in the nine months ending Sept. 30 to Rp 494.6 billion. Astra increased its nine-month profit 8 percent to Rp 3.99 trillion as car sales climbed 38 percent to 154,514 and motorcycle sales rose 30 percent to 1.54 million units.

"Astra needs to sell through the network of Permata and Standard Chartered wants to develop its consumer-banking business in the vast Indonesian market," said Fendi Susiyanto, who helps manage $1.6 billion at PT BNI Wealth Management in Jakarta.

Astra shares gained 91 percent this year, outpacing a 42 percent gain for the benchmark Jakarta Stock Price Index.

Permata's stock is unchanged, trailing a 65 percent gain for the Jakarta Finance Index. Permata stock fell after the government sold a fifth of the lender at a 36 percent discount to market value this month.

"We expect Permata to grow in the coming years as higher economic growth will encourage Indonesian people and corporations to seek funding from lenders," said Setiadharma.

Astra's previous banking venture, PT Bank Universal, fell victim to the 1997-98 Asian financial crisis when tumbling currencies left many borrowers unable to pay debt.

The government injected Rp 4.7 trillion of bonds into Universal, which it seized in June 1999 and merged with four other lenders -- PT Bank Bali, PT Bank Patriot, PT Bank Prima Express and PT Bank Arthamedia.

The new lender was named Bank Permata.

The Indonesian bank rescue agency, a government body set up in 1998 to rehabilitate and handle financial assets, took control of Astra when it seized assets from banks.

In March 2000, Jardine Cycle & Carriage Ltd., Singapore's largest automobile distributor, bought the Indonesian government's 38.4 percent stake in Astra for $506 million. The company has since raised its stake to 47 percent.

The government reduced its stake in Permata, which means jewel in the local language, as part of an asset disposal program aimed at recovering part of the Rp 450 trillion it spent to bail out banks after the Asian crisis.

Astra and Standard Chartered beat Malaysia's two biggest banks, Malayan Banking Bhd. and Commerce Asset-Holding Bhd., and Indonesia's 10th-largest bank, PT Bank Panin, to buy 51 percent of Permata in November, increasing the stake this month when the government sold an additional 20 percent holding.

It was London-based Standard Chartered's first successful attempt in three to invest in an Indonesian lender.