Bank Mandiri to sell written-off assets

Dadan Wijaksana, The Jakarta Post, Jakarta

State-owned Bank Mandiri, the country's largest bank, is planning to auction off up to 40 percent of the non-performing loans (NPLs) that were recently been written off as part of loss- cutting efforts, the management said here on Tuesday.

Alexander Roemongkoy, Mandiri's credit recovery division group head, told a media gathering that a blockbuster auction might become an option if ongoing restructuring efforts failed.

"Of the total (written off NPLs), we expect to auction around 40 percent. From this, we are targeting around a 20 percent to 30 percent recovery rate," Alexander said.

As of Sept. 2002, the bank's loan write-offs reached Rp 20 trillion (about US$2.2 billion). Writing off a loan means removing it from the balance sheet, although the bank still maintains its rights to recover such loans. The recent move was part of a strategy to clean up the bank's balance sheet.

Alexander refused to give a breakdown of the loans.

He said that the recovery target was based on debts that the bank had managed to collect annually over the last three years.

In 2000, 2001 and 2002, Mandiri managed to recover loan write- offs amounting to Rp 0.9 trillion, Rp 1.9 trillion and Rp 1.1 trillion respectively.

Mandiri was formed in 1999 after the merging of a number of ailing state-owned banks, and has now transformed itself into the country's largest bank in terms of assets. As of September last year, the bank's total assets stood at Rp 251.6 trillion.

Alexander also said that the bank had always seriously attempted to restructure debts write-offs as a way of raising cash, with the proceeds to be later used to further strengthen the bank's capital base.

A clean balance sheet and strong financial position is crucial for Bank Mandiri as the government plans to privatize the bank by selling 30 percent of its shares through an initial public offering (IPO).

However, after having being delayed several times, the government has said that it will push ahead with its IPO plan, which it expects to be completed in the first half of this year.