BII upbeat about survival with or without Mandiri

BII upbeat about survival with or without Mandiri

The Jakarta Post, Jakarta

Publicly listed PT Bank Internasional Indonesia (BII) is
optimistic about being able to meet the central bank's capital
adequacy ratio (CAR) requirement by the end of the year, even
without an acquisition by state-owned Bank Mandiri.

Cholil Hasan, the coordinator of the BII management team, said
BII's operation had improved considerably and that he was
convinced the bank would pass the minimum CAR level of 8 percent
this year.

"But the question is whether we want the bank to become better
or just remain as it is," Cholil told reporters last week.

According to him, an acquisition by Bank Mandiri would boost
BII's capital base, pushing its CAR level to safer ground.

BII's CAR, which measures the bank's risked weighted assets
against its capital, stands at some 14 percent, he said.

Bank Indonesia requires banks to have a CAR level of at least
8 percent next year or risk liquidation.

Rudy Hamdani, a member of the management team, said BII would
survive thanks to the US$1.05 billion and Rp 5 trillion (about
$471 million) in hedge bonds injected by the government earlier
this month.

"Our customers don't have to worry. Just look at the figures;
the government is very serious about helping us," he said.

The bonds replaced loans extended to the Sinar Mas Group,
which had turned sour and threatened BII's fragile CAR level.

Sixty percent of BII's credits were awarded to Sinar Mas and
its subsidiaries and a large portion of the loans were channeled
into Asia Pulp & Paper (APP), which is now deferring debt
payments.

Now the bank earns a steady income from the bonds' coupon
rates, Rudy said.

Bank Mandiri agreed to take over BII, provided the government
replaced the Sinar Mas loans with state bonds.

But it now appears that the government and Bank Mandiri might
back off from an acquisition deal.

The government is considering merging weak banks under the
Indonesian Bank Restructuring Agency (IBRA), which could include
BII.

For Bank Mandiri, the acquisition appears untimely as the bank
is scrambling to finalize preparation of its initial public
offering this year.