Bank Mandiri mulls buying IBRA's credit portfolio

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.