Bank Mandiri vows to become locomotive for real sector

JAKARTA (JP): Indonesia's largest bank, state Bank Mandiri, is expected to provide between Rp 7 trillion (about US$1 billion) to Rp 14 trillion in loans this year in a bid to help revive the ailing real sector, president Robby Djohan announced.

He said on Thursday the bank would lend between 10 percent to 20 percent of its total productive assets currently running at about Rp 70 trillion.

"We will be the locomotive financing the real sector," he said at a media conference announcing the legal merger of four state banks into Bank Mandiri, including Bank Bumi Daya (BBD), Bank Dagang Negara (BDN), Bank Ekspor Impor Indonesia (Bank Exim) and Bank Pembangunan Indonesia (Bapindo).

Robby said the loans would be prioritized to export companies, resource-based companies and service companies.

He said the bank would lend its money at a rate between 20 percent to 24 percent, and hoped to gain a margin of around 4 percent.

"These are the rates that we have lived with for quite a long time, so I think they will be okay for companies," he said.

Robby explained that Indonesia's ailing real sector should start to revive early next year as it benefited from the current momentum provided by improving macroeconomic indicators.

"The macroeconomic indicators are doing quite well," he said.

"The only problem now is the lack of liquidity," he added.

The economy enjoyed a 1.8 percent growth in the second quarter of this year compared to the same period last year. The economy contracted by 13.68 percent last year.

Inflation was negative for four months in a row until June, compared to hyperinflation of more than 77 percent in 1998.

The rupiah has also relatively strengthened and stabilized at about Rp 7,000 to the U.S. dollar, compared to around Rp 17,000 last year.

Bank Indonesia's benchmark interest rate has also come down to 13.80 percent from more than 35 percent in the beginning of this year.

Indonesia's battered banking sector completely halted lending in the real sector last year when the economic crisis was still in its worst condition, sending many businesses into either bankruptcy or causing sharp cuts to their production capacity.

But despite the relatively low benchmark rate, businesses still complain that banks have not lowered their lending rates to an affordable level under 25 percent.

Bank Indonesia officials said banks needed another two or three months to adjust their lending rates, noting banks raised their deposit rates when the interest rate was still high.

Bank Mandiri was formed last year with a mission to merge the four ailing state banks, which had a combined loss of Rp 117 trillion in 1998, into a new healthy bank.

The government appointed Germany's Deutsche Bank to advise the restructuring and merger process of the four banks, which has taken nine months.

The government is expected to inject into the state bank some Rp 137.8 trillion in recapitalization funding between the end of July to the end of this year.

Bank Mandiri has passed some Rp 76 trillion in bad debts of the four state banks, about 50 percent of the banks' total loans, to the Indonesian Bank Restructuring Agency (IBRA).

Robby said some Rp 10 trillion to Rp 15 trillion of the bad debts were owed by companies belonging to the family of former president Soeharto and his cronies.

The bank is currently trying to restructure some Rp 51 trillion in problem loans.

Bank Mandiri managing director Agus Martowardojo said some 28 percent of the problem loans would be restructured by the end of this year.

"We're not going to adopt a loan collection-oriented program, but save our customers (debtors) through a restructuring program," Agus said.

"Many of the customers are actually good businesses but are just suffering from the economic crisis," he added.

Robby said he planned to float Bank Mandiri on the stock market in 2001. He said it would be accomplished by offering up to 80 percent of its shares in a bid to make the bank fully independent from the government and raise proceeds to help finance the government bank restructuring program, which is estimated to cost Rp 550 trillion or about 50 percent of gross domestic product (GDP).

"I don't know if the government agrees on this plan. But having just a 10 percent to 20 percent stake will be the best choice for the government," he said.

"The government doesn't want to have banks any longer. The government has almost never received any dividend from the (state) banks," he added.

Bank Mandiri is expected to control 30 percent of domestic market share.

"We will be the country's premier bank," Robby said.

"There's no reason why we can't achieve this because I have the best people here," he added. (rei)