Eight banks to merge with Danamon

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)