Bidders promise the sky for BCA

Bidders promise the sky for BCA

Berni K. Moestafa, The Jakarta Post, Jakarta

By now Indonesians should acknowledged the fact that Bank
Central Asia (BCA) will soon no longer remain under local hands.

So what will BCA end up looking like once the British-based
Standard Chartered Bank Plc or the U.S. investment firm Farallon
Capital Management take over the country's largest retail bank.

For one, both investors have ruled out major changes in the
bank.

"BCA would continue to operate as an independent entity
retaining its brand name and existing business model," said
StanChart in its business plan send to The Jakarta Post.

Farallon is straight forward. "BCA will not become a foreign
bank", reads the title of a press release on its plan for BCA.

With that in mind, BCA as a brand will remain as we know it.

But the similarity in approach does not end there. Both
investors promise to give BCA the extra push that would turn the
bank from merely promising to outstanding.

"SCB (Standard Chartered Bank)'s intent is to unlock BCA's
potential," the British bank expounded.

For its part, Farallon would "embrace the government of
Indonesia, the bank's management, and its shareholders to realize
the full potential of BCA."

With BCA the possibilities are more than just about its size.

In StanChart's view, BCA owns a leading deposit franchise with
a strong foothold in the consumer, and small and medium
enterprises sectors, combined with an extensive branch network.

"Based on due diligence, the bank's transaction technology is
estimated to be two to three years ahead of competitors."

So the road ahead is to expand BCA's position as the leading
player in the consumer sector and to compete "fiercely with the
best foreign institutions," StanChart said.

Farallon, similarly, plans to boost BCA's leadership, notably
in the consumer sector.

The investment firm expects to improve BCA's risk management
and increase the volume and quality of its revenue.

But getting there is a question of management style.

StanChart said it would rely on BCA's existing plans, and
would generally maintain its current management structure.

Farallon has no comments on BCA's management style, but its
plan to hire Deutsche Bank to manage BCA could well mean a
different approach from StanChart's.

Quantifying its promises, StanChart expects an annual growth
of at least 15 percent over the next 10 years on corporate loans,
small and medium enterprise loans, and credit cards.

Farallon believes it can increase BCA's corporate and
commercial loans by 34 percent over the next three years from an
estimated Rp 15.6 trillion (about US$1.5 billion) this year.

Next to StanChart and Farallon's business plans, their
backgrounds may also serve as a crystal ball into BCA's future.

In terms of banking reputation, StanChart has the upper hand.

The British bank counts itself among the world's top financial
institutions with some 77 percent of its revenue coming from its
Asian operations. The bank has been in Indonesia for almost 140
years.

StanChart also claims successful bank acquisitions in India,
Thailand and Hong Kong.

But sources tell of a darker side in StanChart's foray into
the East.

Hans Suta Widhya, a labor expert, noted in an article last
week in Media Indonesia what he called the employee factor
haunting StanChart.

In India, the bank relocated hundreds of its staff without
consulting them, prompting a nation-wide strike by the All India
Bank Employees Association.

In Zimbabwe, StanChart fired some 200 employees over a salary
dispute, and was ordered by the Supreme Court to rehire them,
something the bank did not do.

StanChart officials were not available to confirm the reports.

Back in Indonesia, its earlier attempt to acquire Bank Bali
ran aground because employees deplored the special facilities
StanChart's managers received at Bank Bali's expense.

BCA employees, worrying they would meet a similar fate, have
been demanding the government not to sell the bank.

StanChart now promises to work hard in developing an effective
working relationship with BCA employees.

Indeed it plans on making BCA the employer of choice in
Indonesia to "attract, develop and retain the best local minds."

Competitor Farallon learning from StanChart's Bank Bali case,
promised "no lay-offs within the next two years."

But with Farallon the concerns may lie elsewhere.

Some analysts call the company a vulture fund making profit
from buying near dead companies at basement prices.

As an investment fund, the California-based Farallon manages a
highly diversified portfolio with the single aim of bringing its
investors the highest return rate on their money.

Farallon lacks hands-on experience in managing a bank. And so
is its investment experience in Indonesia, which began not until
after the financial crisis knocked down many local firms in 1998.

BCA too was a victim of the crisis that landed the bank under
state control after receiving government bonds to keep it afloat.

Now that the bank is on sale, its future is actually of low
priority.

Despite StanChart and Farallon's bright plans for BCA, that
would bring them a weighting of only 20 percent during the final
evaluation process to set a winner for BCA.

A bulky 50 percent rests on the price offers, which some
believe to range between Rp 5 trillion and Rp 6 trillion.

But every year some Rp 7 trillion in taxpayers money will
continue to feed BCA regardless how its new owner treats the
bank.