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.