Bank Bali provides bonus, rules out final dividend

JAKARTA (JP): Publicly listed Bank Bali has decided not to pay a final dividend for 1997 but will give shareholders bonus shares in addition to an interim dividend of Rp 45 per share.

The bank's president, Rudy Ramli, said in a statement following a shareholders meeting over the weekend that the issuance of the bonus shares is expected to strengthen the bank's capital structure and boost the shares market liquidity in the stock exchange.

The statement did not say how many bonus shares would be issued for each unit share but did say that investors would not have to inject additional cash for the bonus.

The shareholders agreed to the management proposal for not providing a final dividend for the calender year 1997 because most of the earnings would be allocated for loan loss provisions in anticipation of a deterioration in the quality of productive assets this year, while the remainder would be used to strengthen its working capital amid the country's economic crisis.

The bank decided in December to give an interim dividend of Rp 45 per share, for which payment had started in February.

The bank has set aside Rp 236.9 billion from the 1997 net profit for the loan loss provision, which is an increase of about 530 percent from 1996.

The bank's consolidated profit before loan-loss reserves reached Rp 343.60 billion in 1997, up 58.4 percent from 1996.

The huge amount for the provision for the loan loss, however, resulted in a year-on-year drop in consolidated net profit by 47 percent to Rp 70 billion in 1997.

The bank said that by the end of last year, it had booked an interest income of Rp 472.69 billion, up 42.3 percent compared to 1996, resulting from the interest of interbank transactions.

A tight liquidity environment and declining confidence in the domestic banking sector have forced many banks to secure their balance sheet by going into the interbank money market.

The bank also said that it enjoyed a lucrative profit from its over the counter foreign exchange transaction, which resulted in a 799 percent jump in forex income to Rp 73.98 billion.

Economic uncertainty has spurred public demand to buy foreign currencies for a variety of reasons, including for protection against an expected hyperinflation and other potential losses.

In mid-March 1998, the U.S. investment bank Merrill Lynch said that Bank Bali would be one among the very few Indonesian private banks to survive the current crisis, pointing out the bank's strong liquidity, cash flow and capital.

Bank Bali said its capital adequacy ratio last year was 10.78 percent, which was well above the previous minimum 8 percent ratio requirement.

Last week, the country's financial authority slashed the minimum ratio requirement for end-1998 to 4 percent due to difficulties to fulfill the 8 percent level because banks' risk- weighted assets had further deteriorated and the need to provide huge capital to cover the expected sharp increase in nonperforming loans amid economic hardships.

Bank Bali did not disclose its current ratio level, but Merrill Lynch said recapitalization would remain a necessity and that the bank should be able to accommodate the challenges. (rei)