BNI to subscribe to Rp 6.1t worth of staple bonds
BNI to subscribe to Rp 6.1t worth of staple bonds
JAKARTA (JP): Publicly listed state-owned Bank Negara
Indonesia (BNI) said on Thursday that it planned to exchange
bonds worth Rp 6.18 trillion (US$657 million at the current
exchange rate) with higher rate staple bonds from the government
in a bid to increase its liquidity.
BNI president Saifuddien Hasan said the amount represented 10
percent of the Rp 61.8 trillion in government bonds the bank
received for its recapitalization program.
"We have anticipated the possibility of the government issuing
this policy and have already identified the bonds we intend to
exchange," Saifuddien told reporters before attending BNI's
public expose at his office.
He said the bank wanted to trade a portion of its fixed rate
bonds for the staple bonds.
The government decided to offer recapitalized banks a chance
to trade their recapitalization bonds with new ones carrying
higher coupon rates.
The decision came after the banks' recapitalization bonds
failed to attract investors in the secondary bond market, thus
causing the banks difficulties in raising cash.
"The consideration here is that we want to be flexible in case
we need liquidity. We plan to sell the new bonds in the market,"
Saifuddien explained.
He said he refrained from exchanging more than 10 percent of
the bank's current bonds because the government's offer also
required the bank to accept lower coupon rate staple bonds in
return.
Current recapitalization bonds bear rates of only 12 percent,
as against the 16 percent rates offered by the staple bonds.
However, banks can only exchange 30 percent of their
outstanding recapitalization bonds for the higher coupon rate
staple bonds.
The remaining 70 percent must be swapped for staple bonds
carrying a lower interest rate of about 10 percent.
This policy is expected to prevent a surge in bond interest
payments by the government.
"The government wants to maintain its fiscal costs,"
Saifuddien explained. "But the consequence is that our revenue
will drop," he added.
He was referring to the other 70 percent of the bank's bonds
that will carry lower interest rates, thus generating less
revenue.
He said the benefit of subscribing to the staple bonds would
depend on the "trade off" between the return from the lower
coupon rate staple bonds and the liquidity from the sale of the
higher coupon rate staple bonds.
"Certainly, if BNI could benefit from the rise in liquidity to
generate more income, than it (the exchange) would still be
profitable," he added.
Like BNI, other recapitalized banks received only government
bonds to shore up sufficient productive assets for the
recapitalization program.
At first, the government expected the banks to sell the bonds
in the secondary market. But with interest rates of only 12
percent compared to the 14 percent offered by Bank Indonesia SBI
promissory notes, banks found few takers.
During the public expose, BNI announced a loss of Rp 1.07
trillion during the third quarter of this year, as against a loss
of Rp 4.6 trillion for the same period last year.
The bank said that interest income remained in negative
territory at minus Rp 223 billion as the amount of interest
payments were still higher than interest income.
This was partly due to a surge in total operating costs to Rp
2.89 trillion as of September 30 from Rp 1.96 trillion in the
same period last year.
BNI said that the income earned from the interest on its
recapitalization bonds did not yet cover the interest costs of
third party savings during that period.
"Whereas the 95.9 percent surge in operating costs was mainly
caused by foreign exchange losses of Rp 691.4 billion," the bank
said.
For next year, BNI has targeted a net profit of Rp 1.4
trillion, Saifuddien continued.
He also expressed confidence that the banking sector was
reviving, albeit slowly. (bkm)