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.