Banking, corporate sectors battered but not down

JAKARTA (JP): The currency woes that continue to bruise the Indonesian economy have given the country's corporate and banking sectors a beating, but have not completely devastated them, an international financial report says.

The latest issue of Bank of America's Asian Financial Outlook published for September says the country's banks and corporations have been battered by the continuing depreciation of the rupiah against the U.S. dollar, but that they are "not down".

"Concerns are valid but exaggerated," the report says of the jittery tension affecting investors who are considering a quick sell-off to avoid defaults or corporate bankruptcies.

It attributes the optimistic outlook to the low percentage of corporations' total debts in foreign currency which were due in 1997 fiscal year, and adequate cash flow for these debt repayments.

Only about 16 percent of the total borrowings of corporations are in foreign currency, and are due in 1997 fiscal year, the report says.

The corporations are also supported by a high level of current assets to provide secondary repayment alternatives, it says.

Estimating a 7 percent growth to the corporations' earnings before taxes and a 20 percent decline in the rupiah against the U.S. dollar, the report says the currency fall has not drastically hampered earnings before tax coverage.

The report says Indonesian banks have a high level of foreign currency borrowings, but the extent was more modest than corporate issuers.

Liquidity is also stronger among banks as the report shows current assets outpaced current debt maturities, it says.

The report bases its analysis on 14 publicly listed companies ranging from cement and paper companies to glass and textile companies, and 12 publicly listed banks including the state-owned Bank Negara Indonesia (BNI).

The corporations include Astra International, Bakrie & Brothers, Indocement Tunggal Prakarsa, Matahari Putra Prima, Mulialand, Semen Cibinong, Argo Pantes, Barito Pacific Timber, Indofood Sukses Makmur, Indah Kiat Pulp & Paper, Polysindo Eka Perkasa and Tjiwi Kimia.

The banks are BNI, Bank Danamon, Bank Internasional Indonesia (BII), Bank Dagang Nasional Indonesia (BDNI), Lippo Bank, Bank Bali, Bank Niaga, Bank Umum, Panin Bank, Bank Bira, Bank Tiara and Bank PDFCI.

Among the fourteen groups, the report recommends Barito, Indofood, and Mulia as good buys due to their high liquidity and low leverage.

It favors BII, Bank Lippo and Bank Bira for maintaining low debt levels in their funding structures and registering satisfactory loan-deposit ratios and strong capitalization.

The report highlights concerns for Bakrie, Matahari, and Argo Pantes for their high levels of foreign exchange debts.

Among banks, the report says its major concern was the high foreign currency loan deposit ratios.

But, it says given that a number of these facilities were syndicated loans rather than bonds, banks have the flexibility of converting near-term maturities into longer-term debt. (das)