GE Capital Service to buy majority stake in Bank Bali

JAKARTA (JP): GE Capital Services, the financial arm of the U.S.-based General Electric Co., plans to acquire a majority stake in Bank Bali, a bank director confirmed on Monday.

Bank director Subarjo Joyosumarto, said the American investor was in the final round of talks on recapitalization of the publicly listed bank.

"Bank Bali is currently negotiating with the foreign investor," he said on the sidelines of a hearing with House Commission VIII for the state budget and finance.

He said there was no decision yet on the stake amount GE Capital would buy into the bank.

"If they want to provide the minimum 20 percent funding, the government will provide 80 percent. But if they want to provide up to 30 percent of the funding, we will come up with the other 70 percent."

GE Capital will be the first foreign investor to acquire majority ownership in a local bank.

Local banks have suffered heavily from the sharp fall in the rupiah and the ongoing economic crisis.

The government's new banking law allows foreign investors to effectively take out 100 percent ownership of local banks.

Bank Bali qualified to join the government bank recapitalization program for which the government will provide up to 80 percent of the funding requirement.

According to Bank Indonesia, Bank Bali will need Rp 1.82 trillion in recapitalization funding to bring the bank's capital adequacy ratio (CAR) -- the ratio between equity capital and risk-weighted assets -- to the minimum level of 4 percent.

Banks qualifying for the government recapitalization plan must provide the minimum 20 percent recapitalization funding requirement by April 21 or risk closure.

The government closed down 38 banks on March 13 in a bid to restructure the country's ailing banking sector.

Bank Bali president Rudy Ramli, said on March 24 that a foreign investor was offered a 90 percent stake in the bank through a private placement.

He said the move would exclude the bank from the government bank recapitalization funding as the foreign investor would provide this funding.

The foreign investor was selected from 12 candidates who responded to invitations Bank Bali made to prospective buyers after hiring J.P. Morgan Securities Asia Pte. Ltd. as its private placement advisor.

Bank Bali was founded and remains under the control of the Ramli family. The family own close to a 30 percent stake in the bank, while Japan's Sanwa Bank Ltd. and Singapore's United Overseas Bank hold minority stakes.

According to Bank Indonesia data published through its homepage on March 13, Bank Bali's bad debts total Rp 1.66 trillion. The bank, with total assets of Rp 12.18 trillion, has Rp 6.2 trillion in outstanding 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.

Meanwhile General Electric Co.'s finance arm, GE Capital Services, denied Monday that it's seeking to buy a stake in Bank Bali.

"This is a rumor, I've heard of the rumor...it has no basis in fact," said Robert Van Zwieten, Hong-Kong based treasurer for Asia at GE Capital.

"We hear a lot of rumors in Indonesia," he said. "This is a rumor and we do not comment on rumors," he quoted as saying by Dow Jones.