Bank Mandiri mulls buying IBRA's credit portfolio

By Reiner S

BATAM (JP): Stated-owned Bank Mandiri was considering buying the "good" bank loans held by the Indonesian Bank Restructuring Agency (IBRA) as part of efforts to expand its credit portfolio, the bank's president Robby Djohan said on Friday.

Robby said the bank would use the government's bank recapitalization bonds to purchase IBRA's credit assets.

"But we'll only purchase the good ones," he said during a business gathering with the bank's customers. "I'll talk this over with Cacuk (IBRA chairman Cacuk Sudarijanto)," he added.

He said not all of the bank loans transferred to IBRA were bad ones, as a proportion of them had turned sour mainly due to the economic downturn or because the banks were closed down.

The agency currently holds around Rp 230 trillion worth of bank loans transferred from closed-down, nationalized and recapitalized banks. But most of the assets are nonperforming loans. The agency also controls another multibillion dollars worth of fixed assets surrendered by indebted former owners of banks.

The agency is mandated to recover the loans, including using debt restructuring or asset liquidation.

Bank Mandiri is the result of a merger of four ailing state banks. The bank has been recently recapitalized by the government to lift its capital adequacy ratio to more than the minimum 4 percent requirement. But the government only injected bonds worth Rp 178 trillion instead of fresh cash.

Robby said the purchase of IBRA's credit assets would help the agency in its bid to restructure the ailing real sector and the economy.

He said part of the agency's credit portfolio was considered to be good assets transferred from closed-down banks.

The government has closed down 66 banks since the economic crisis started in the middle of 1997.

Many debtors, particularly those with good track records, have complained that they have found difficulties in obtaining bank loans because of their IBRA-controlled status. They have also said that the agency seemed to be lacking in priorities to resolve their status.

Robby said that the agency was already "overloaded" in trying to restructure and sell its various assets.

Asked on the possibility that IBRA would turn down Bank Mandiri's proposal because the structure of the government bank recapitalization bonds was not attractive, he said, "We can resolve this. We can sit together and do the calculations."

He explained that it was important for IBRA to immediately "reinvigorate" its credit accounts to help get the real sector moving again.

"Our intention is to help revive the economy," he said.

Robby said the purchase of IBRA's good credit portfolio would help the bank to expand its own credit portfolio.

"Why should we only focus on finding new customers. Why not buy the good ones from IBRA?

"They (the government) gave us the bonds, so we'll pay them again with the bonds," he said.

Asked about the poor performance of the government bank recapitalization bonds in the secondary market, he said, "It's a matter of pricing, and not because there isn't confidence in the bonds."

He suggested the government provided a discounted price for the bonds as demanded by the market.

The government has so far injected Rp 282 trillion worth of bank recapitalization bonds. Less than 10 percent of the bonds were recently offered to investors on the Surabaya Stock Exchange, but there was a severe lack of interest in them.

Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie said on Wednesday the government may have to revise the structure of the bonds, including the possibility of discounting them to allure investors.