Tue, 24 Jun 2003

Bank BRI upbeat about IPO plan despite problems

The Jakarta Post, Jakarta

State Bank Rakyat Indonesia (BRI) is optimistic it will launch its initial public offering (IPO) in October despite lingering problems that some say may cause a delay.

BRI president Rudjito said on Monday that the government's experience in preparing the Bank Mandiri IPO has provided a valuable lesson to help ensure the success of BRI's offering.

Bank Mandiri is another state bank that will offer a 20 percent share through an IPO early next month.

BRI will sell up to a 30 percent stake late October as part of the government's 2003 privatization program.

"What we have (the problems) in BRI is relatively no different from those of Mandiri's. The problem-solving models are already there, we just need to copy that model with a bit of revision.

"And we still have until October to fix things up," Rudjito told reporters before a hearing with House of Representatives Commission IX on financial affairs.

However, as in the case of Mandiri -- in which the IPO plan had to be delayed several times -- BRI also has some unsettled problems that have the potential to delay the IPO.

Among other things, the potential obstacles revolve around two issues: uncertainty about the status of the bank's accumulated losses posted when it was recapitalized in 1999, amounting to Rp 26 trillion, and a settlement scheme on the bank's tax arrears. When the government rescued the bank, the former covered most of the latter's financial obligations. This is seen as a gain for the bank and is thus subject to taxation.

These were the same problems that contributed to the delay in Mandiri's IPO plan, before the government stepped in and settled them by issuing rulings, in the form of presidential decrees, to clear the way for the sale.

Asked whether rulings would be issued in the case of BRI, Rudjito refused to give a specific answer, saying it would be up to the government as the bank's majority shareholder.

In the first quarter of this year BRI posted a gross profit of Rp 731 billion, up from the Rp 535 billion in the same period last year, on higher interest revenue from loans.

The bank has said it would continue to boost profits from its lendings, adding that it would unload around Rp 2 trillion worth of recapitalization bonds next year. The bank holds a total of Rp 29 trillion worth of recap bonds.