Bankers question feasibility of BI's swift consolidation
Bankers question feasibility of BI's swift consolidation
The Jakarta Post, Jakarta
Some bankers questioned on Wednesday whether Bank Indonesia's
plan to push for swift consolidation of the country's banking
sector, by encouraging more mergers in the near future, was
applicable.
Bank Mandiri director for corporate secretary Nimrod Sitorus,
whose bank is the largest lender by assets, said there were
several obstacles preventing the consolidation of banks.
First, there was no urgency for most banks to merge with or
acquire another banks, because at present the banking industry
was still profitable.
Banks here also have little experience in carrying out
voluntary mergers as most, if not all, mergers in the country
were classified as forced mergers.
"Mergers in the past happened because of the regulator's
demand," he said, adding that mergers required a costly and
complex process, such as restructuring assets, reorganizing the
company and unifying the information and technology applied by
the resulting bank.
"In the case of Bank Mandiri, we spent a lot of time, among
other things, to lay off more than 10,000 employees and to
integrate the information and technology systems," he said.
Mandiri is a merger of four state banks -- Bank Exim, Bank
Bumi Daya, Bapindo and Bank Dagang Nasional.
Mergers and acquisitions are encouraged by the central bank in
its Indonesian Banking Architecture (API), introduced last year,
aiming mostly to reduce the number of banks here, from the
current 132 banks to 35 to 58 by 2010, with capital ranging from
Rp 100 billion (about US$10,200) to Rp 50 trillion.
Echoing Nimrod was Pardy Kendy, Bank Buana president director,
who said that while agreeing that the API would eventually
produce a sound banking industry, he doubted whether voluntary
mergers would be attractive to small- and medium-sized banks.
"Many small- and medium-scale banks here are owned by a family
or an individual, who would be reluctant to sell their banks
because they perform well," he said, pointing to the fact that
such banks had outperformed the bigger banks in the past five
years.
"Medium banks, such as Bank Buana, have performed well, with
profitability supported by their efficiency rather than their
market share," he said.
"The only way for us is to expand our business and become big-
scale banks. But the problem is, not so many investors are
interested in medium-scale banks," said Pardi.
Institute for the Development of Economics and Finance (Indef)
economist Iman Sugema added that voluntary mergers were unlikely
to happen because the gap in assets value between big-scale banks
and medium banks were too wide.
"Even among the top 20 banks, the gap is too wide. Bank
Mandiri, the number one on the list, has assets 20 times more
than those of BPD Jabar, which is 20th on the list," he said.
"How could you expect voluntary mergers to happen? Unless it
is among banks of the same size," he said. (006)