CBA-BII joint venture stalled by crisis

CBA-BII joint venture stalled by crisis

SYDNEY (Reuters): Commonwealth Bank of Australia (CBA) said yesterday its Indonesian banking joint venture, launched in July last year, has failed to attract any business because of the economic crisis there.

"We set up that venture on July 1 last year and because we were a 'Johnnie come lately' operation, we were unable to get anything going because things were starting to unravel then," said Catherine Hallinan, chief manager for CBA Asia Development.

In July 1997, CBA formed a 150 billion rupiah (worth A$83 million then) bank joint venture with BII, Indonesia's third largest bank, for the corporate market.

Hallinan said CBA has also suffered a foreign exchange loss on its investment as the joint venture bank, PT Bank BII Commonwealth, was capitalized in rupiah, which has fallen from 2400 rupiah to the U.S. dollar in July 1997 to more than 10,000 rupiah Thursday. The Indonesian currency gained ground yesterday to about 8,000 per dollar.

"There has been some depreciation on the currency side, but it is immaterial to the size of this bank," Hallinan told Reuters.

CBA has a market capitalization of more than A$16 billion.

She said CBA was monitoring the Asian economic turmoil in regards to its plans for the region, an area it has been keen to expand into.

Asia's banking sector is undergoing a period of rationalization because of the economic crisis.

"In this sort of situation it does create some opportunities, but these are quite a high risk, and I think it is best to wait to see what the extent of the crisis is going to be before we do anything," Hallinan said.

The majority of CBA's assets and source of profits are in Australia.