Five banks sign merger deal to form Bank Permata
The Jakarta Post Jakarta
Bank Bali, Bank Universal, Bank Arthamedia, Bank Prima Express and Bank Patriot on Friday signed a merger agreement to become the country's 10th largest bank in terms of assets under the new name Bank Permata (Jewel).
The signing followed Bank Bali and Bank Universal's general shareholders meetings on Friday that approved the merger. The other three banks' shareholders agreed to it last week.
"What's pending now is Bank Indonesia's license," I Nyoman Sender, who chairs the Indonesian Bank Restructuring Agency's (IBRA) Bank Restructuring Unit (BRU), told reporters at Bank Bali's office where the merger document was signed.
Nyoman expected Bank Indonesia to issue the license by Sept. 30. This would allow the banks to start the operational merger, using Bank Bali's operational system as its platform.
Nyoman said the first to join Bank Bali's platform would be Bank Arthamedia. Others would follow within a two-week interval, starting with Bank Universal, Bank Prima Express and later Bank Patriot.
IBRA's project director, Chandra Purnama said all banks would continue to operate normally throughout the merger process.
"By the end of December we hope to have integrated the five banks' operations, so that by January they're effectively one," Chandra said.
Bank Permata is expected to own assets worth Rp 32 trillion (about US$ 3.5 billion), making it the country's 10th largest bank.
Its combined customer base will be around 1.2 million to 1.3 million people with third party liabilities amounting to Rp 28 trillion.
"The majority is in favor for the bank to focus on the retail market and later we'll lend a greater percentage of (loans) for that share," Nyoman said.
The new bank will have a 12 percent capital adequacy ratio (CAR), which measures a bank's capital against its risked weighted assets, mainly loans. Bank Indonesia requires all banks have a minimum CAR level of 8 percent or else face closure.
IBRA is forcing the five banks to merge to avoid having Bank Indonesia shut them down due to low CAR levels. Out of the five, only Bank Bali's CAR was above 8 percent.
The banks were placed under IBRA's control after the agency bailed them out with government bonds in the wake of the 1997 economic crisis.
Called the recapitalization bonds, they bolster banks' CAR levels with steady interest revenues paid with taxpayers money.
To give Bank Permata a head start, IBRA has injected it with another Rp 4.6 trillion in state bonds.
Nyoman added IBRA planned to layoff 950 of the around 7,000 staff at the banks for which it would provide Rp 157 billion in severance payments.
The signing on Friday came amid ongoing protests by the five banks' employees who demanded better severance schemes.
Merging weak banks with stronger ones is part of efforts to restructure the country's vulnerable banking sector. Bank Permata will become one of several IBRA merger products.
In 1999, state owned Bank Dagang Negara, Bank Bumi Daya, Bank Exim and Bank Pembangunan Nasional merged into what is now at Rp 262 trillion in assets the country's biggest bank, Bank Mandiri.
That was followed by the merger of several small banks into Bank Danamon, while the merger of Bank Pikko and Bank Danpac is now in the pipeline.