Bank BNI looks to restart lending soon

JAKARTA (JP): Bank Negara Indonesia (Bank BNI) may resume lending in September after the completion of its Rp 52.8 trillion (US$775 million) recapitalization program, the state bank's president Widigdo Sukarman said on Wednesday.

He cautioned that a resumption in lending by the country's largest bank would depend on its success in improving the quality of its loan assets and the further decline in domestic interest rates.

"We would initially lend to a select group of customers who have a good track record," he told a news conference following the bank's shareholders meeting.

Widigdo said third party deposits in the publicly listed bank soared to Rp 69.4 trillion (US$1.02 billion) as of May from Rp 27.1 trillion at the end of 1997, but the funds could not be used as income-generating loans because of the bank's negative capital adequacy ratio (CAR).

He attributed the increase in third party funds to the massive transfer of funds from banks closed by the government in the sweeping bank restructuring program in April.

Like most other major domestic banks, BNI has frozen lending since last year amid the continuing economic crisis. The credit crunch has caused most businesses to operate below capacity due to a lack of working capital.

Hopes the banking industry will resume lending have been fanned by the government's recapitalization of all major private and state banks and the significant drop in domestic interest rates.

Widigdo said the BNI's recapitalization program to achieve a 4 percent CAR level was expected to be completed in September.

He added that the bank's shareholders approved plans to raise about Rp 52.79 trillion through a rights issue in the bid to reach the CAR target.

He said existing shareholders held the right to purchase 35 new shares for every existing share at a price of Rp 347.58 each.

"The government will become a standby buyer for the remaining new shares that aren't bought by the existing shareholders," he said.

The government is set to finance up to 100 percent of the bank's recapitalization cost.

Widigdo believed the Rp 52.79 trillion additional capital would be sufficient to recapitalize the bank if it could regain a positive interest rate spread margin in September.

He said reaching the latter goal would depend on whether the bank could restructure its problem loans as scheduled.

BNI corporate loan director Agus Daryanto said the bank shouldered about Rp 24.5 trillion in problem loans.

In addition, it has transferred Rp 24.3 trillion in bad loans to the Indonesian Bank Restructuring Agency.

Agus said BNI expected to restructure 75 percent of problem loans under its management by September.

"We started negotiating debt restructuring agreements with debtors in May and we have surpassed our target for June." He did not provide details on the agreements.

Widigdo was convinced that the 75 percent target by September and a goal for 80 percent by December could meet the pledge in the government's latest letter of intent with the International Monetary Fund.

Widigdo said prospects for lending were good if interest rates continued to fall and "I'm optimistic that the rates will further decline".

The benchmark interest rate of Bank Indonesia's one-month SBI promissory notes fell on Wednesday to 18.80 percent from 20.34 percent last week.

The central bank expects the rate to further decline to about 15 percent over the next couple of weeks.

Meanwhile, president of listed Bank Internasional Indonesia Indra Wijaya announced a resumption in lending.

The private bank is set to lend between Rp 3 trillion and Rp 4 trillion in excess liquidity over the next six months, he said following a shareholders meeting on Wednesday.

He added it was prudent for the bank to lend its excess liquidity as SBI rates decline.

The bank is one of the country's largest private institutions to be recapitalized by the government.(rei)