BNI, Permata should learn from past merger mistakes

Rendi A. Witular and Dadan Wijaksana, Jakarta

Bank Indonesia (BI) is urging state-owned Bank Negara Indonesia (BNI) to set up a comprehensive feasibility study for its plan to merge with Bank Permata to avoid similar "mistakes" in the merger made by Bank Mandiri and Bank Danamon.

"The central bank supports the merger plan, but the process should be clear. The banks must ensure that the merger will result in a healthier bank in terms of financial ability, performance, human resources and service," BI's Senior Deputy Governor Anwar Nasution said on Tuesday after attending a meeting with the House of Representatives's budget committee.

"The merger is not about moving someone's money from the right pocket to the left. If that's the case it will be useless," he said.

Anwar explained that BNI and Permata should learn from the mistakes made during the merger of Bank Mandiri and Bank Danamon, which, he said, are still undergoing a long consolidation process despite the fact that they had spent a lot of money and laid off hundreds of employees for the mergers.

Bank Mandiri was formed in late 1998 out of the merger of four state banks: Bank Export Import Indonesia, Bank Pembangunan Indonesia, Bank Bumi Daya and Bank Dagang Negara. Bank Danamon was enlarged in 2000 when it was merged with Bank Jaya, Bank Tiara, Bank Pos, Bank Rama, Bank Nusa Nasional and Bank Duta, and Bank Risjad Salim Internasional.

BNI, which focuses on the corporate sector, proposed the merger to the government a month ago in order to strengthen its financial ability and to expand its business to the retail and consumer sector, the main businesses of Permata.

Separately, Deputy State Minister of State Enterprises for banking and finance Suad Husnan said that his office was still evaluating the proposal and expected to come up with a result in the second semester.

BNI and Permata are the country's second and seventh largest banks respectively in terms of assets. BNI has assets worth Rp 131 trillion (US$19 billion) and Permata about Rp 30 trillion.