BRI hopes to control UFJ-BRI Finance

Rendi A. Witular, The Jakarta Post, Jakarta

State Bank Rakyat Indonesia (BRI) plans to make a number of acquisitions this year, including increasing its share in multifinancing unit PT UFJ-BRI Finance to a majority stake.

BRI vice president director I Wayan Alit Antara said the bank was in the process of obtaining shareholder approval for becoming the controlling stakeholder in UFJ-BRI Finance, which is jointly owned with a Japanese bank. He said obtaining a majority stake would strengthen BRI's leasing businesses.

"We have not decided the exact number of shares we are going to purchase, or the amount of funds needed. But for sure, we will become the controlling shareholder of the company soon," said Wayan after a hearing with lawmakers on Monday.

BRI currently has a 45 percent stake in the company, with the remaining shares controlled by Japan's UFJ Bank.

Wayan said if the purchase was approved by shareholders, BRI would turn UFJ-BRI Finance into a leasing company focusing on serving small and medium enterprises throughout the country.

The government owns an 80 percent stake in BRI, with the remaining shares held by the public. BRI, the nation's fourth largest lender by assets, has the largest network of branches in the country.

Aside from UFJ-BRI Finance, the bank was also eyeing other financial companies in the field of leasing this year.

In a report to House of Representatives Commission VI for state enterprises, trade and industry, BRI said it had allocated some Rp 940 billion (about US$100 million) this year for its acquisitions, including boosting its stake in UFJ-BRI Finance.

"BRI has the ability to provide far more funds than stated in the report for expanding its business this year through nonorganic means," said Wayan.

The report also said the bank would channel some Rp 15.89 trillion in new loans in 2005, an increase of 26.04 percent from last year. About 80 percent of the new loans will be channeled to small and medium enterprises.

Through 2007, the bank's lending growth is projected to be between 18 percent and 20 percent.

To support this expansion, BRI has estimated it will need growth in third-party funds of between 8 percent and 10 percent annually, with 60 percent of the funds coming from deposits.

For this year, the bank has projected third-party funds will increase by Rp 10.4 trillion, a 12.72 percent rise from last year's figure.

The bank also plans to unload some Rp 8 trillion of its government recapitalization bonds this year. Some Rp 4.5 trillion of the proceeds will be used for lending expansion, Rp 2 trillion for investment in state bonds and the remaining Rp 2 trillion for investment in other instruments.

The report also covered the bank's plan to open five new branches, 50 supporting branches, 133 service offices, seven sharia banking branches and 14 supporting branches for sharia banking.