BNI moves closer to BTN merger

Urip Hudiono, The Jakarta Post, Jakarta

Bank Negara Indonesia's bid to acquire Bank Tabungan Negara (BTN) has moved a step further with the government saying that a merger was crucial in advancing the bank's capital to support plans on part of the government to provide affordable housing loans to the public.

The government, State Minister for State Enterprises Sugiharto said on Wednesday, would also prioritize state-owned banks in the consolidation plan so as to maintain its control over BTN, which specializes in providing home loans to low- and middle-income people.

As the government plans to request that the lender come up with the financing scheme to provide up to one million low-cost houses for the public within the next five years, Sugiharto added, BTN would need to boost its financial strength.

"BTN's limited capital has in the past rendered this plan (to provide financing for low-cost houses) impossible, while the government itself has no budget allocation for BTN for that," he said.

"We must therefore look for other sources of capital, particularly from the capital market."

Sugiharto added, however, that merging BTN with another bank was the most feasible way to obtain the needed capital, instead of a recent proposal to sell 20 percent of the government's stake in the bank through an initial public offering (IPO).

"The results from an IPO would only be 'pocket change' -- it would not be enough," he said.

The minister also asserted that the government had considered of state-owned banks for a merger with BTN, so as not to dilute its current ownership in BTN.

The government currently is the sole owner of BTN.

Meanwhile, BNI president Sigit Pramono said that the country's third largest lender was fully prepared to go ahead with the merger, having set aside between Rp 2 trillion and Rp 3 trillion for the purpose.

"We will present our proposal to the central bank next week," he said.

"The proposal will consist of an initial acquisition of BTN, in which we will buy out the government's entire stake in BTN, to be followed by a legal merger."

An "operational merger," Sigit added, would ensue later on, perhaps within two years.

He also asserted that BTN's management board would not be changed as they were the ones most competent in the business of home loans.

Sigit expected the BNI-BTN merger, if materialized, would be mutually beneficial. For BNI in particular, it would strengthen its chance to become an anchor bank and improve its prospects ahead of a second public offering next year.

The government currently holds a 99.12 percent stake in BNI, with the bank's employees owning 0.05 percent, and the investing public holding the balance.