Thu, 25 Mar 1999

Foreign bank to take 90% interest in Bank Bali

JAKARTA (JP): Bank Bali president Rudy Ramli said on Wednesday a foreign bank had been chosen to take a 90 percent stake in the bank through private placement.

The move will exclude Bank Bali from the government's recapitalization program and save the bank from possible hostile measures by the government or other parties in the future, Rudy said.

"Bank Bali must be recapitalized, but we will not join the government's recapitalization program because our foreign investor, which will take a controlling stake, will recapitalize the bank," he told journalists at his office.

Although he declined to name the foreign bank or its country of origin, he disclosed its involvement in the country dated back dozens of years.

It was chosen from the 12 foreign banks which responded to invitations Bank Bali made to prospective buyers after hiring J.P. Morgan Securities Asia Pte Ltd as its private placement advisor.

J.P. Morgan said in a statement it could not reveal details of the deal because it was still considered confidential. "This process is ongoing and making solid progress," it said.

According to Rudy, the foreign investor was in talks with related government officials to get the government's support. Rudy's family founded the bank and is a shareholder.

As mandated by the International Monetary Fund, amendments to the banking law allow foreign investors to take close to 100 percent ownership in a local bank. But the government has yet issued any regulation on the matter.

Rudy said the foreign bank would take up Bank Bali's newly issued shares to recapitalize the institution, which would negate a planned rights shares as originally planned.

According to Bank Indonesia, Bank Bali needed a total of Rp 1.82 trillion (US$205 million) to bring its capital adequacy ratio -- the ratio of equity to risk-weighted assets -- to the 4 percent minimum requirement set by the government.

Bank Bali was included in the government's recapitalization program, along with eight other private banks.

Under the government's recapitalization plan, the government would provide up to 80 percent of the recapitalization fund and bank owners are required to supplement the remainder.

However, Bank Bali will not join the government's recapitalization program due to the entry of the foreign investor.

Also, Bank Bali will not join a merger plan to create what has been dubbed the Power Bank, Rudy said.

"We don't know if this plan still exists. I was once invited to attend a meeting to talk about this matter. But so far there has never been any follow-up measure," Rudy said.

"Even if this plan exists, we could not join this plan simply because we have taken our path, that is having foreign investor taking controlling stake in Bank Bali."

News reports have said that Bank Bali, Bank Lippo, Bank Niaga, Bank Universal and unlisted Bank Bumiputera will be merged to form Power Bank.

Rudy said news reports that Bank Bali was one to be included in the merger plan affected the bank's operation.

Bank Bali's share on the Jakarta Stock Exchange closed at Rp 325 on Wednesday, up Rp 25 from Tuesday's close of Rp 300.

He added the bank was left with no choice but to invite foreign investors to take over the institution because it, like other Indonesian banks, faced big loan-loss provisions and problems.

He said the bank's foreign exchange loans, which stood at 23 percent of all credit as of June 1997, were more than 70 percent today due to the sharp depreciation of the rupiah against the U.S. dollar. Many of the loans are nonperforming.

According to Bank Indonesia's data published through its homepage on March 13, Bank Bali's bad debt totaled Rp 1.66 trillion. The bank, with total assets of Rp 12.18 trillion, extended a total of Rp 6.2 trillion in credit.

With 265 offices across the country, the bank has 1.13 million customers/accounts and mobilized third party funds totaling Rp 8.2 trillion.

"But those figures keep changing from time to time," Rudy said. (rid)