Bank Niaga to launch rights issue next year
The Jakarta Post, Jakarta
The publicly listed Bank Niaga may have to delay its planned rights issue until the first quarter of next year on fears that the market may not be able to fully absorb the huge issue under current conditions.
"The timeframe for the rights issue is flexible. We're still looking at the situation especially within the context of the current (political) transition. We're afraid the market may not be ready," said Bank Niaga president Peter B. Stok as quoted by detik.com on Monday.
Bank Niaga, which is 52.8 percent controlled by Malaysia's Commerce-Asset Holdings, plans to raise around Rp 1 trillion (about US$109 million) to boost capital by offering new shares to existing investors. The bank initially planned to launch the rights issue in August or November of this year.
The government owns some 20 percent shares in the country's ninth largest bank by assets, while the investing public holds the remainder.
Peter said that the delay would not affect the bank's capital condition as its capital adequacy ratio (CAR) until the end of this year was estimated at around 11 percent, way above the central bank's minimum requirement of 8 percent.
Analysts have said, however, that the bank needs to increase capital in order to boost lending.
The government via the Ministry of Finance's asset management company PT PPA has previously expressed concern that the rights issue program would dilute its ownership in the bank as the government would not buy the new shares due to the lack of funds.
Reports said that PPA has demanded Bank Niaga provide compensation for the expected dilution of government ownership.
Peter said that the bank's management had yet to discuss this problem with PPA, which has been busy carrying out the divestment of government shares in Bank Permata. The sale is expected to be completed later this year.
Bank Niaga expects to reap some Rp 500 billion in profit this year, up from Rp 467.3 billion last year. The bank expects to provide between Rp 4.5 trillion to Rp 5 trillion in new lending this year, and plans to increase lending by 30 percent in 2005.