Bank Permata plans reverse stock split

The Jakarta Post, Jakarta

Bank Permata, the country's seventh largest bank in terms of assets, plans to reduce the number of its shares outstanding on the Jakarta Stock Exchange (JSX) through a reverse stock split.

The 1:25 reverse split, to be effective in early June, will increase the price of Permata's shares 25 times, which should prevent the shares from becoming a target of speculation. Speculators often target low-priced shares.

"The move is aimed at making our shares more attractive for long-term investors, and at the same time to deter speculators," said Permata president Agus Martowardojo at a meeting with investors.

Permata shares on the JSX ended lower by Rp 5 to Rp 45 after the announcement due to profit taking.

The bank now has total assets of Rp 28.98 trillion (US$3.41 billion). Its capital adequacy ratio, as of the end of last year, reached 10.78 percent, well above the central bank's minimum requirement of 8 percent.

The government, which holds a 91.3 percent stake in Permata, plans to sell 71 percent of its shares in the bank: 51 percent to strategic investors and 20 percent to public investors. The sale is expected to start in September or October.

Agus said that several top investment banks from Europe and the United States had expressed interest in the bank, by conducting a preliminary assessment of the bank.

However, Agus refused to disclose the names of the potential investors.

He explained that most of them came to Permata after receiving reports that a protracted legal dispute over a huge amount of funds stashed at the bank had been resolved.

Agus said that the Supreme Court had issued a new verdict favoring Permata. He did not elaborate.

Permata had been locked in a dispute with a private company called PT Era Giat Prima (EGP) over some Rp 456.5 billion worth of funds, claimed by the latter as a commission fee obtained from Bank Bali in 1999.

But the government, which later merged Bank Bali into Permata, has insisted that the transaction between Bank Bali and EGP was not valid.