'BRI to get 30% of IPO proceeds'

Rendi A. Witular, The Jakarta Post, Jakarta

The government may allow state-owned Bank Rakyat Indonesia (BRI) to keep around 30 percent of the proceeds from the sale of the bank's shares so that it can strengthen its capital base.

State Minister of State Enterprises Laksamana Sukardi said that the government was still assessing BRI's financial performance in a bid to find the right level of funds needed by the bank.

"The assessment is still ongoing, but we have planned to allocate around 30 percent of the privatization proceeds to the bank," said Laksamana on the sidelines of a hearing with House of Representatives Commission IX for budget and financial affairs on Tuesday.

The government is planning to sell 30 percent of its stake in the bank in October this year through an initial public offering (IPO). The government needs to sell state assets, including BRI, to help plug the widening budget deficit, estimated to reach Rp 35.2 trillion (US$4.1 billion) this year.

Earlier, the the bank disclosed that it needed around Rp 2.5 trillion to strengthen its capital base.

The bank said that without an injection of new capital, the bank's capital adequacy ratio (CAR) would decline to around 11.5 percent in 2004 from 14.7 percent at present. CAR is a ratio between capital and risk-weighted assets like credits.

Thus, it would risk violating the central bank's "Basel Accord II" ruling, which obliges banks to have a minimum CAR of 12 percent next year, the bank warned.

The bank, the country's fourth-largest in terms of assets, said that should it be allowed to keep 50 percent of the proceeds from the IPO, or around Rp 1 trillion, and its CAR would increase to 18 percent next year.

However, Minister of Finance Boediono said earlier that the government would take all the IPO proceeds, which are projected at Rp 1.5 trillion to Rp 2 trillion, to help plug the state budget deficit.

BRI has strongly lobbied the House of Representatives to support its bid to keep some of the IPO proceeds, and the House has given its support.

BRI's CAR has been in decline over the past few months, reaching 12.36 percent by the end of June, down from 14.7 percent in March.

In anticipation of possible disappointing results after the IPO, BRI also plans to issue dollar- and rupiah-denominated bonds worth about $150 million and Rp 1 trillion respectively.