BNI president upbeat about share offering
JAKARTA (JP): The president of state-owned Bank Negara Indonesia (BNI) 1946, Widigdo Sukarman, said yesterday he was confident the bank's initial public offering (IPO) in November would be well received by investors despite the large number of shares it had to sell.
Widigdo said the bank, which started a "roadshow" promotion campaign here yesterday, would take the IPO roadshow to six other cities in Indonesia and to major financial centers in Japan, Europe and the United States to attract investors.
"We are confident that foreign and domestic investors will respond positively. The potential demand for BNI shares is quite good," he told reporters after launching the bank's roadshow program, which is to end on Oct. 24.
He said the bank, the country's largest commercial bank, would sell 1.08 billion new shares, or around 25 percent of its enlarged capital.
The share prices, each with a face value of Rp 500 (20 U.S. cents), are to be determined at the end of the roadshow. The shares are to be sold to the public during the primary offering period between Nov. 6 and Nov. 29.
Widigdo hinted that the price of the bank's shares would be set at a reasonable level even though the potential demand for the shares was promising.
"The bank's IPO is merely based on business factors so that we will make a success not only on the primary market but also on the secondary market," he said in an indirect reference to the decline of a number of listed companies' share prices to below their IPO prices.
He said the proceeds from the IPO would be used to boost its capital and strengthen its short-term and long-term finance.
Assets
BNI's total assets were valued at Rp 32.35 trillion ($13.7 billion) on June 30 this year, with deposits amounting to Rp 17.90 trillion and loans to Rp 20.44 trillion.
Its pretax profit totaled Rp 198.6 billion in the first semester of this year, or more than half of last year's pretax profit of Rp 378.7 billion.
David Chang, the research division director of securities company PT Vickers Ballas Tamara, said the bank, which had the widest national network, with over 489 branches throughout the country and six overseas branches, was projected to sell its shares at a price which offered a price earning ratio between eight and 10 times of its 1997 profit. On the Jakarta Stock Exchange, the banking sector's price earning ratio is generally eight times its 1997 profits.
"If the bank offered (the shares) at a discount, the issue is likely to be successful because it deserves a premium over the banking sector, given its sovereignty," he told The Jakarta Post.
The bank is expected to raise around Rp 1 trillion from the IPO, allowing it to strengthen its capital and improve its capital adequacy ratio from its current level of 9.1 percent to about 12 percent, he said.
Chang said the bank, which is expected to maintain its loan to deposit ratio at around 85 percent to 90 percent, would generate sufficient funds from the IPO to support its growth over the next three to four years.
He projected that BNI would maintain its credit expansion rate at about 17 percent a year for the next few years in conformity with the central bank's low loan expansion target.
BNI's net interest margin is likely to remain at 3.5 percent in 1997 as it compensates for the rise in its reserve requirement from 3 percent to 5 percent next April, he said.
On funding, Chang said the bank had an advantage over its competitors in strengthening its retail market, given its large branch network and its low sovereign risk. (hen)