Bank Niaga to unload more recap bonds

The Jakarta Post, Jakarta

Bank Niaga announced on Thursday its plan to unload some Rp 1 trillion (around US$110 million) worth of recapitalization bonds this year either through the secondary bond market or by exchanging them with restructured loans held by the Indonesian Bank Restructuring Agency (IBRA).

Bank Niaga president Peter B. Stok said that the move was necessary to enable the bank to expand its loan assets.

"It's not healthy when the composition of a bank's assets is made up largely of recap bonds, therefore the move was necessary," he told reporters on the sidelines of the bank's annual shareholders meeting.

The government injected the bonds in the late 1990s to recapitalize the bank.

The bank currently holds more than Rp 9 trillion-worth of bonds, which represents some 40 percent of its assets which totaled Rp 22.9 trillion as of December 2001.

Peter said that Bank Niaga wanted to expand its loan assets to between Rp 9 trillion and Rp 10 trillion this year from Rp 7.9 trillion last year.

The bank also reported, during 2001, it had sold off around Rp 700 billion-worth of bonds in the secondary market.

Bank Niaga and other recapitalized banks enjoy interest rate revenue from the bonds. Last year, this revenue was a major contributor to local banks' profit as lending activity remained subdued amid the overall weak economic condition.

The plan to unload more recapitalized bonds comes as the government is trying to sell a 51 percent stake in the publicly listed bank.

Peter dismissed the suggestion that unloading the bonds would make the Bank Niaga stake less attractive to investors, saying that interest revenue from the bonds was only one contributing factor to profit, and the bank would also enjoy more revenue by expanding its loan asset.

IBRA shortlisted four bidders on Wednesday competing for the Bank Niaga stake; two of them foreign-led consortia.

The four going through to the next bidding stage are consortia led by Australia & New Zealand (ANZ) Banking Group Ltd., Malaysian financial group Commerce Asset-Holdings Berhad, Bank Victoria International and Batavia Investment Fund.

In a bid to lure investors into Bank Niaga, the government has recently converted 40 percent of the bank's fixed-rate bonds into variable rate bonds.

The fixed-rate bonds carry an interest rate of 12.8 percent, while the variable rate bonds are linked to the interest rate of Bank Indonesia SBI promissory notes currently hovering at more than 16 percent.