Mon, 08 Aug 1994

Consortium of 3 local banks to take over Continental Bank

JAKARTA (JP): A consortium of three local banks, Bank Central Asia, Bank Utama and Bank Danamon announced their plan on Saturday to take over Continental Bank.

Trenggono Purwosuprodjo, Bank Utama's president, told a press conference that the consortium is ready to inject fresh funds into the bank and take control of its ownership.

The takeover plan was announced only two days after the consortium signed an agreement to provide technical assistance to the bank, which, according to reliable sources, was suffering financially.

Technical assistance is often used by local banks as an initial step to take over other banks. Bank Danamon, for example, used this strategy before it acquired Bank Sampoerna.

Sugiantoro, the president of the Continental Bank, who also attended the press briefing, said that "the bank is still economically viable" denying rumors to the contrary.

Trenggono also denied the rumors but added that one of the reasons the consortium took over the bank is "because the consortium members have loans in that bank."

He, however, declined to disclose the amount of the loans provided by the consortium to the bank.

Sources said that Continental Bank, with assets of around Rp 508 billion (US$241 million) as of March, suffered a liquidity problem when most of its loans extended to its affiliated companies turned sour.

Bad debts

They said that Lili Sumantri, the majority shareholder of the bank also allegedly incurred a significant amount of bad debts in the bad loan ridden Bank Bapindo.

Trenggono declined to elaborate on the amount of fresh funds to be injected into the bank or the size of the share the consortium wants in the bank.

"Details about the financial injection and the share acquisition are being assessed," he said, adding that the consortium will soon submit a takeover proposal to Bank Indonesia for approval.

"The present owners have given a positive response to our offer and we are optimistic that the monetary authority will give a green light to our deal," he said.

Sugiantoro said Continental Bank, which has paid-up capital of around Rp 50 billion, is 95 percent owned by Lili Sumantri, who also controls a number of companies operating in the steel, textile, agriculture, travel and black carbon industries.

The other five percent of the bank's shares are owned by Fasli Damanik.

Sugianto said the bank has a capital adequacy ratio of above eight percent, the minimum level set by Bank Indonesia, and its loan-to-deposit ratio is around 111 percent, above the maximum level of 110 percent. (hen)