BNI steals spotlight at capital mart conference

JAKARTA (JP): State-owned Bank Negara Indonesia 1946 won the spotlight during the two-day capital market conference that ended at the Shangri-La Hotel yesterday.

The bank, which plans to launch its initial public offering (IPO) later this year, was the real star at the conference, with over 150 business executives and analysts jostling in the hotel's crowded Sulawesi Room to see its presentation.

"I am very enthusiastic to get first-hand information about the bank's IPO," said a participant.

BNI president Widigdo Sukarman and Jusuf Glenn, the president of state-owned PT Dana Reksa Securities -- the underwriter of BNI's public offering -- unfortunately unveiled nothing about the bank's IPO plan except a presentauion of the bank's brief financial profiles.

"The amount of shares to be offered to the public and when we will exactly launch the IPO have not been fixed," he said. "But for sure, we will do it this year."

Other companies such as PT Tambang Timah, PT Gadjah Tunggal, Sinar Mas Group and PT Texmaco also simultaneously held their business presentations during the first day of the conference, which was held to commemorate the 19th anniversary of the Indonesian capital market. But BNI was the center of attention.

BNI's IPO, first revealed to the public in early 1994, was initially scheduled for July this year on the bank's 50th anniversary. But it was delayed due to undisclosed reasons.

Last month, Minister of Finance Mar'ie Muhammad said that the bank's IPO would be delayed until next year, creating uncertainty not only for investors but also for other IPO candidates.

Widigdo later clarified the bank's IPO schedule and told the press that the government had made a firm commitment to float the bank's shares by the end of this year.

The clarification certainly brought much relief to other IPO candidates, because Widigdo's firm statement on BNI's IPO schedules would enable them to make better plans for their own IPOs.

A number of companies were reported to have delayed their IPOs to avoid a head-to-head competition with BNI's public offering.

Securities analysts described the overwhelming amount of attention given to BNI at the brief presentation as a signal of the possible success of the bank's capital market debut.

Hurdles

But they warned that charges on the government's excessive control over state-owned banks could cast a shadow over BNI's IPO if its management failed to convince the public of its independence.

The mounting bad loans that hit state-owned banks in the past three years could also become a hurdle to BNI's planned IPO, billed to become the largest public offering of the year.

The bad loan problem and the government's possible intervention in BNI's management were both raised during the meeting. Inefficiency, which has become the common label of most state-owned companies, was also heatedly debated at the presentation.

In his response to the questions over the ability of the bank's management to dismiss senior government officials' unrealistic demands, Widigdo flatly said: "We will reject them."

"We won't do it if any proposed project is not feasible," he said.

It seemed that it was very easy for Widigdo to frequently turn down very powerful requests. For other state-owned banks, such as state-owned Bank Pembangunan Indonesia (Bapindo), senior government officials' requirements were obligatory. In retrospect, it is not surprising that a large amount of loans were defaulted over the past few years. From a single borrower alone, Eddy Tansil, Bapindo suffered over Rp 1.3 trillion (nearly US$600 million) in bad loans.

Analysts basically believed most of the bad loans that took place in state banks in the past five years were partly due to the inability of the banks' managements to reject unfeasible projects proposed by their politically well-connected borrowers, such as Eddy.

Borrowers like Eddy often utilized the power of senior government officials to force state-owned banks' managements to finance their unfeasible projects.

Widigdo said that the most important thing is how you reject unfeasible financing proposals. "If the proposals are unfeasible, how can we finance them?" he said.

In fact, BNI's bad loans were only 0.58 percent of its outstanding credits of around Rp 20.7 trillion as of March this year.

In comparison, the bad loans (totally defaulted) suffered by all the six state-owned banks -- BNI, Bapindo, Bank Rakyat Indonesia, Bank Dagang Negara, Bank Tabungan Negara, Bank Bumi Daya and Bank Ekspor Impor Indonesia -- reached a total of Rp 6.3 trillion as of April this year, accounting for around 2.25 percent of the total lendings provided by them. Meanwhile, the bad loans in the whole banking industry amounted to 3.19 percent of the total outstanding credits.

Many securities analysts doubted that the large amount of bad debts in the state-owned banks would affect BNI's public offering.

"I think everybody knows that BNI is the healthiest state bank in the country," said Adriansyah Chaniago, a securities analyst with DBS Securities. "So I don't think the bad loan problem would damage it."

Most state-owned banks, particularly BNI, are more solid at present, with most of their lending starting to grow after their consolidation measures in the past three years, he told The Jakarta Post.

A securities dealer with PT Sigma Batara said that BNI -- as the largest bank and as a leading financial institution in the country -- is "the trademark" in the local banking industry.

"That's why many investors are now waiting for BNI's IPO," he said, adding that in stock trading activities, the size of the company is the determinant factor for investors to buy.

Assets

BNI, established on July 5, 1946, is now the largest bank in the country. The bank booked total assets of Rp 31.81 trillion (US$13.83 billion) as of March this year, with outstanding loans of Rp 20.70 trillion and deposits of Rp 18.01 trillion.

The bank's pretax profit in the January to March period reached Rp 112.6 billion.

The amount of its problem loans (partly unpaid) were much higher, reaching around 4 percent of the outstanding loans as of March, with bad (totally unpaid) loans of 0.58 percent.

At present, the bank operates 485 branches -- mostly in Java, Sumatra and Bali -- and 300 automated teller machines in Jakarta and other important cities in Java.

The bank's pretax profit, which rose by 26.1 percent to Rp 410.1 billion in 1995, is projected to reach Rp 445 billion this year.

Widigdo said that the bank's assets and lending are expected to respectively increase by 12.8 percent and 17 percent this year.

He said the bank's lending to retail borrowers would be gradually increased, so that its portion to the total lending could be raised to 50 percent in next three years.

The lending to corporate borrowers, which at present accounts for around 65 percent of the bank's total loans, would be consequently reduced to allow an increase in the lending to the retail sector, he said.

"We hope the ratio of the lending to corporate and retail borrowers would reach an equilibrium of 50:50 before we enter the year 2000," he said.

He said that the expansion of the retail services is one of the bank's important strategies in maintaining its dominance in the lending market. (hen)