Eight banks to merge with Danamon
JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) will merge Bank Danamon with five publicly listed banks and three non-listed banks later this year to form a stronger banking institute, the agency's chairman, Glenn S. Yusuf, said on Tuesday.
He said the move would help Bank Danamon, which was nationalized last year, become one of the country's core banks.
"We'll do it in a couple of months' time. But we'll have to discuss it first with Bapepam because some of the banks are publicly listed," he told reporters following a hearing session with the Supreme Advisory Council (DPA) on IBRA's programs.
Bapepam is the country's capital market supervisory agency.
Glenn said the banks to be acquired by Bank Danamon are publicly listed Bank Tiara Asia, Bank PDFCI, Bank Duta, Bank Rama, and Bank Tamara, and non-listed Bank Pos Nusantara, Bank Nusa Nasional, and Jaya Bank Internasional, which were nationalized in August, 1998, and last March.
The government has also temporarily taken over publicly listed Bank Niaga, which is still negotiating with potential foreign investors to help finance its recapitalization program.
IBRA secretary Christovita Wiloto said that the merger plan was a strategic move designed to establish synergy among banks taken over by the government.
"We don't need too many banks, but we need an extensive network of bank branches," he said.
He said that once the Damanon merger plan was completed, the bank would be comparable with state-owned Bank Mandiri.
Four state banks are set to be merged into Bank Mandiri by the end of this month.
However, Christovita said the Danamon expansion plans may be modified depending on developments.
Glenn said that Bank Niaga and Bank Risjad Salim International (RSI) were not included in the Bank Danamon expansion plans.
He said Bank RSI would be merged into Bank BCA because both banks were owned by the Salim Group before being nationalized.
Glenn said that the agency would sell Bank BCA through the capital market next year to recover the government's investments in the bank.
The government has issued some Rp 103.8 trillion in bonds to finance between 80 percent to 100 percent of the cost of recapitalizing the four banks nationalized in 1998 and seven other major private banks.
The government plans to issue another Rp 244.8 trillion worth of bonds to finance the recapitalization of the seven banks taken over last March and the seven state banks, four of which are to be merged later next month.
Glenn was optimistic that the government's recapitalization spending could be recovered at a gain.
"The market value of the banks recapitalized by the government is now much higher than the investment put by the government in the banks," he said.
The government has allocated some Rp 34 trillion in the current 1999/2000 state budget to pay for the coupon rate of the bonds.
IBRA is expected to contribute Rp 17 trillion from the sale of its various assets, including the recovery of non-performing bank loans transferred to the agency.
IBRA is set to control more than Rp 230 trillion in non- performing loans (NPLs). The loans were transferred by closed and recapitalized banks to clean up their balance sheets. The agency plans to restructure the loans or liquidate the non-performing assets to help finance the coupon rate of the bonds.
But IBRA deputy chairman Eko S. Budianto said recently that only 30 percent of the Rp 230 trillion in NPLs could be covered by the assets now controlled by the agency. He explained that the value of the collateral was either initially marked up or had plunged due to the economic crisis.
However, Eko said the largest source of "revenue" for IBRA would not be from the recovery of the NPLs but from divestments in the recapitalized and taken-over banks.
Meanwhile, Glenn declined on Tuesday to provide clear plans on what steps would be taken against bank debtors who had marked up the value of their loan collateral.
"We will see it case by case," he said when asked whether the agency would take legal action. (rei)