BRI plans to sell performing corporate loans to other banks
JAKARTA (JP): State-owned Bank Rakyat Indonesia (BRI) plans to sell performing corporate loans to other local banks to lower its corporate credits to 20 percent of its total loan portfolio, as mandated by the government and the International Monetary Fund (IMF).
BRI president Djoko Santoso Moelyono told journalists on Thursday that the bank's corporate loans currently stood at Rp 6.5 trillion (US$902 million) and accounted for 27 percent of its outstanding loan portfolio.
"We will sell our corporate credits to other banks, especially those performing credits. There must be many banks wanting them," he said on the sidelines of a seminar hosted by Harvest International Inc.
He said he would sell those credits only to local banks so that not all good borrowers would go to foreign banks.
Other options to reduce BRI's corporate loan portfolio, Djoko said, would be through syndications, that is sharing the loans with several other banks, or through a loan swap, by exchanging its corporate loans with retail loans of other banks.
According to the government's agreement with the IMF, BRI will have to begin in March to divest its corporate loans, except for certain traditional customers, which will constitute a maximum of 20 percent of its total portfolio.
The process of divesting corporate loans will have to be completed by the end of 2000.
Djoko said BRI's corporate loans accounted for only about 20 percent of its total loans before the crisis. But when the crisis struck, some of the corporate loans, especially those denominated in foreign currencies, expanded in rupiah terms.
Nevertheless, he said, the bank was able to restructure some of its corporate loans, including the controversial ones to The Ning King's textile firm PT Argo Pantes.
Djoko said The Ning King had paid BRI Rp 266 billion in cash.
Bond
Because of the successful restructuring of some of the corporate loans, the cost of recapitalization for the bank was expected to drop to Rp 29 million from the initial estimate of over Rp 30 trillion, he said.
According to its agreement with the IMF, the government is expected to issue the first tranche of recapitalization bonds for BRI by April 15, 2000.
However, before issuing the recapitalization bonds, the government has to first reshuffle BRI's management team, which according to the IMF agreement, must have been conducted by Feb. 15. Djoko and his team of management are still intact.
Sources said the government had proposed to Bank Indonesia to retain Djoko's management team in BRI, but it was rejected by the central bank because Djoko did not pass its fit and proper test.
It is not clear, however, if the government will propose another name to replace Djoko in the near future to Bank Indonesia.
Under the agreement, the government will have to issue the second tranche of the recapitalization bonds following the completion of the end of 1999 financial audit and satisfactory implementation of the business plan, expected by June 30.
The recapitalization of BRI aims to bring its capital adequacy ratio -- the ratio of its capital to risk-weighted assets -- to the minimum level of 4 percent.
Djoko said he had submitted BRI's business plan to the finance minister for evaluation.
After the recapitalization, Djoko said, the next target for the bank would be to sell some of its shares to the public through an initial public offering (IPO) of shares on the capital market.
"We were prepared for an IPO for so long with Pak Mar'ie," he said, referring to then finance minister Mar'ie Muhammad. "We initially planned to float our shares in 1999, but because of the crisis, we shelved the plan."
He targeted the bank to be listed on the local exchange by 2003. (rid)