Bank Bira plans rights issue to boost paid-up capital

JAKARTA (JP): Publicly listed Bank Bira said yesterday it was confident it would achieve its 1997 net profit projection of Rp 75 billion (US$20.8 million) despite the currency crisis and high interest rates.

The bank even planned to increase its paid-up capital from Rp 400 billion now to some Rp 1 trillion in the second half of next year through a rights issue.

Nevertheless, Bank Bira president Bambang W. Panutomo said in a public presentation here that the bank would place some of this year's net profit into reserves.

"We increased our loan reserves to Rp 51 billion in September from Rp 28 billion in June to conform with prudent banking practices and provide a greater cushion for 1998," he added.

He said the bank currently had a loan reserve of 1.8 percent of its total loans, while nonperforming loans were only 0.8 percent of total loans.

With such a higher than normal 1 percent loan reserve, Bank Bira's net profit stood at Rp 41 billion as of last September, Bambang said.

Nevertheless, Bambang said the bank's net interest margin was expected to decrease to about 5 percent by the end of this year from 7.41 percent in June.

He denied rumors that Bank Bira had suffered a great loss from foreign exchange trading due to the monetary crisis.

The bank's net open position in U.S. dollars currently stands at US$29.65 million, or 23.2 percent of its capital. Foreign exchange income reached Rp 11.4 billion by the end of September.

"It shows that we made a profit in foreign exchange trading," he said.

He noted that his bank had planned a rights issue in the second half of this year to strengthen its capital structure.

"We plan to increase Bank Bira's capital to Rp 1 trillion with the rights issue," he said.

The bank's paid-up capital is Rp 400 billion, while its authorized capital is Rp 500 billion, with a capital adequacy ratio of 10.15 percent, above the minimum level of 9 percent.

He added that the majority of the bank's shareholders bought approximately 4 percent of Bank Bira's shares through the local stock market in September, bringing their total ownership to 61 percent.

"This shows confidence in Bank Bira's management as well as the future of Bank Bira," he said.

Bambang said the bank would start issuing credit cards in early 1998, in cooperation with General Electric Capital.

The bank has targeted at least 15,000 cardholders for the first year of operation. (08)