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.