BCA plans to provide new loans to 'healthy sectors'
SINGAPORE (JP): Giant Bank Central Asia (BCA) expects to provide about Rp 4 trillion (US$516.13 million) in new lending this year which will be primarily loaned to consumer goods firms and export-related businesses, according to the bank's president Djohan Emir Setijoso.
Djohan said that in the consumer goods sector, the bank was particularly interested in food, pharmaceutical and cigarette businesses.
"They're doing quite well because consumer demand has returned. We'll concentrate our loans at the moment on the three businesses," he told a business luncheon held on Friday as part of the bank's overseas road show.
BCA plans to offer between 15 percent and 30 percent shares through an initial public offering (IPO) on May 19 through May 23. This will be a landmark IPO for the country.
Djohan said that some pharmaceutical companies had claimed their sales had already reached precrisis levels.
He said that in the export-related sector, the bank was interested in doing business with plantation firms and textile companies.
"We find the export market also very encouraging," he said.
He said that local textile companies that had survived the country's economic crisis were now moving toward full production capacity.
"They need money to finance additional machinery," he said.
"The sectors we're avoiding at the moment include property," he said, pointing out that the local property sector was still in the doldrums.
Djohan said the Rp 4 trillion new lending did not include the loan portfolio to be acquired from the Indonesian Bank Restructuring Agency (IBRA).
"New lending this year will be around Rp 4 trillion ... This doesn't include the IBRA loan," he said.
Djohan also said the loan expansion would be financed internally.
He pointed out that the bank had some Rp 20 trillion in secondary reserves mostly invested in short-term Bank Indonesia SBI promissory notes, and about $1 billion in interbank placements.
"Over the next one to two years, we'll have the liquidity to grow in lending," he said, in response to questions regarding the bank's ability to finance lending as the bank's books show a huge amount of relatively illiquid government bank recapitalization bonds.
"The interbank placements that we have are all postcrisis interbank placements with banks that have survived the crisis," Djohan said.
Many Indonesian banks previously suffered liquidity problems as their interbank loans had been placed in banks closed down by the government.
Djohan also said that BCA had signed a technical assistance agreement with the Bank of America to develop its consumer lending operation.
He added that the bank had recruited a credit risk management expert from Chase Manhattan Bank.
"Credit risk management is something new to us," he said.
BCA is 92.8 percent controlled by IBRA, a unit of the finance ministry. The government nationalized the country's largest private bank in May 1998 after it was hit by a massive run amid plunging confidence in the banking industry.
The remaining 7.2 percent stake is owned by the Salim Group, the bank's former owner.
IBRA will launch the IPO in a bid to raise cash to help finance the 2000 state budget.
After a road show in Hong Kong and Singapore, the next stop this week will be in the U.S. which includes New York, Boston and Washington D.C. The last round will cover Europe including London, Edinburgh, Amsterdam and Frankfurt and will be completed on May 9.
IBRA and the four lead underwriters of the IPO which include Merril Lynch, Lehman Brothers, PT Danareksa Securities and PT Bahana Securities will decide the final IPO price. The indicative IPO price is set at between Rp 1,350 and Rp 1,750 per share.
After nearly two years under the supervision of IBRA, BCA has become healthier, with a Rp 641.29 billion net profit in 1999 compared to a loss of Rp 28.40 trillion in 1998.
Djohan said that net profit in the first quarter of 2000 was Rp 370 billion.
"Our balance sheet is clean and promising," Djohan said. (rei)