Foreign banks in talks with IBRA over stake in Bank Niaga

JAKARTA (JP): Several foreign banks have approached publicly listed Bank Niaga, and the Indonesian Bank Restructuring Agency (IBRA) over plans to acquire a stake in the bank through the government's divestment program this year, Bank Niaga said on Tuesday.

Bank Niaga president Peter B. Stok confirmed that talks had taken place with local and foreign investors to purchase part of the government's shareholding in the bank.

"It (the approach) is at a very early stage of our divestment process," Peter told reporters at a seminar.

He said investors could purchase up to 51 percent of Bank Niaga's shares, the amount the House of Representatives approved recently.

Peter refused to comment further on the investors, saying it was too early to reveal more details.

But he dismissed worries that legislators might reject a foreign controlling stake in Bank Niaga.

He said when legislators approved the 51 percent Bank Niaga share divestment, they did not specify by what means the privatization should take place.

He hinted though that the government would most likely seek a private placement, instead of a public offering in the local stock market.

"IBRA is still studying this (the divestment options)," he added.

A company official, who declined to be named, said the foreign investors were banks from Malaysia, China and Australia.

The source said these banks wanted to control a local bank in view of the prospect of a booming banking sector once the Asean Free Trade Area (AFTA) has come into effect in the year 2003.

According to him, the divestment of Bank Niaga is scheduled for August or September this year.

"The due diligence process for potential investors is underway," he said.

The government, through IBRA, obtained a 97.15 percent stake in Bank Niaga, after the agency injected the bank with Rp 9 trillion (about US$758.53 million) worth of recapitalization bonds to take over its non-performing loans.

The divestment of Bank Niaga is part of the economic reform targets set out by the government and the International Monetary Fund (IMF).

Along with Bank Central Asia (BCA), the divestment in Bank Niaga was slated for last year. Yet depressed market conditions at that time prompted the House to reject the government's schedule.

In response, the IMF has delayed the disbursement of its $400 million loan tranche until now.

At present, the market remains sluggish, if not worse, with political tension dashing hopes of maintaining last year's strong economic growth.

The banking industry has yet to resume its lending role, as recapitalized banks still rely on government bonds for earnings.

Peter said that soaring Bank Indonesia certificate interest rates put pressure on Bank Niaga's earnings from government bonds.

He said all of the bank's recapitalization bonds carried fixed rates, which ran the danger of being outstripped by Bank Indonesia certificate rates.

"Of course for us in the banking industry, this (condition) is very worrisome," he said, adding that he hoped interest rates would fall in the near future.

Peter said that for this year, Bank Niaga planned to approve between Rp 1 trillion to Rp 1.5 trillion in new loans.

"In the past three to four months we've extended Rp 200 billion to Rp 300 billion in new loans," he said.

According to a company official, the bank's total loans stood at Rp 6.3 trillion.

Of that amount, 50 percent went into the manufacturing sector, 20 percent to the small and medium enterprise sector, 15 percent to trading facilities, and 10 percent to the agribusiness sector.

The source further said that Bank Niaga was considering the development of its assets through mergers.

He said some of the local banks with which Bank Niaga could merge were Bank Bali, Bank Danamon, and Bank Universal.

He also said that the bank's capital adequacy ratio (CAR) was 21.2 percent, comfortably higher than this year's minimum 8 percent requirement set by Bank Indonesia.(bkm)