Bank Global plans rights issue to boost capital

JAKARTA (JP): Publicly listed Bank Global plans a rights issue in the second semester of this year to strengthen the company's capital structure.

Company president Irawan Salim said on Tuesday that the rights issue was expected to raise Rp 200 billion (about US$23.5 million) in fresh funds.

He said the company expected shareholders to approve the plan within the next two months.

"Proceeds from the rights share issue will be used to increase Bank Global's paid-up capital from its current level of Rp 90 billion," he said at a media gathering.

Irawan said that Bank Global's total assets were worth Rp 500 billion with paid-up capital of Rp 90 billion as of the end of 1998.

"Despite the crisis, we managed to book a profit due to our conservative approach," he said, saying the bank recorded a gross profit of about Rp 3.9 billion last year.

He said that the bank's third party funds (deposits) jumped by 280 percent to Rp 406 billion at the end of 1998 from the same period in 1997, due to a sharp increase in the number of new depositors.

Bank Global was placed by Bank Indonesia, the central bank, in category A, according to the soundness of its capital structure. Irawan said the bank's adequacy ratio (CAR) was 21.36 percent in September, far above the minimum 4 percent level that must be reached by banks this year.

CAR is the ratio of paid-up capital to risk-weighted assets.

"Indonesians are more selective nowadays in choosing banks to deposit their money. Our good reputation attracts people although we offer relatively small interest rates compared to other private banks," he said.

"We have received more than 500 new customers per month, most of them are former customers of banks placed in category B or category C, and also from the now defunct banks."

Banks listed in category A are those with CAR higher than 4 percent, which do not require government assistance, category B banks are those with CAR between 4 percent and minus 25 percent, and are eligible to join the government-sponsored recapitalization program. Banks that cannot raise their CAR to above the minus 25 percent cutoff level face closure.

Irawan also said that the increase in the number of customers has forced the company to recruit more employees and open new branch offices.

He said the bank's total credit stood at Rp 180 billion as of the end of 1998. Most of the loans were issued to small and medium-sized businesses in urban centers throughout West Java.

"We have no plans to expand our business to corporate banking because the sector is proven to have bigger risks than small and medium businesses and retail banking," he said. (gis)