Wed, 16 Feb 2000

Government plans IPO for BRI

JAKARTA (JP): Finance minister Bambang Sudibyo said on Tuesday that he would push for the initial public offering (IPO) of Bank Rakyat Indonesia (BRI) after the state bank's recapitalization program was completed.

Bambang expressed optimism the IPO would attract foreign investors because of the bank's strong core in micro financing for small to medium businesses and farmers.

"I'm optimistic about BRI. And if we launch an IPO, foreign investors will be very interested," he told the House of Representatives Commission IX on state budget and banking.

Bambang said several foreign investors had informed him of their interest in BRI because "they're optimistic they could get a high return".

The government is scheduled to start the first phase of BRI's recapitalization program in April and to complete it in June. However, it will depend on the bank meeting its business plan, including progress to reduce its corporate loan portfolio to a maximum 20 percent.

The divestment, which will start in March for completion by the end of this year, is designed to make BRI primarily focused on micro-scale lending, which has been its traditional core business.

Bambang said BRI suffered financial difficulties because it ventured into corporate loan activities, which were particularly vulnerable to the impact of the economic crisis.

He said BRI's remaining 20 percent corporate loan portfolio would consist only of top corporate customers who were true entrepreneurs and entered into business with the bank long before the financial crisis started in the middle of 1997.

The government is also expected to replace the existing management of BRI.

Germany's Deutsche Bank was appointed to assist BRI in restructuring its nonperforming loans (NPLs). The category five loans were transferred to the Indonesian Bank Restructuring Agency (IBRA).

Bambang said Deutsche Bank indicated that the cost of recapitalizing BRI would be lower than the initial projection of more than Rp 32 trillion.

"The cost would be Rp 2 trillion to Rp 3 trillion lower than the initial estimate," he said.

Bambang explained that the lower recapitalization cost was due to the bank's success in restructuring its NPLs, allowing the bank to cut the amount of its provision, which meant a lower recapitalization cost.

"BRI's NPL restructuring has been successful," he said.

Bambang also told the House that he had assigned the director general of financial institutions to immediately complete an analysis of Bank Tabungan Negara (BTN).

"My personal view is that BTN should return to its traditional core, which is home loans," he said.

Bambang said that he would not allow the bank to start its recapitalization program if the problem was not settled.

Asked about the prospects of Bank Mandiri, Bambang said: "Bank Mandiri needs more time to focus on its internal consolidation first.

"It's a real challenge to merge four ailing banks."

Bank Mandiri was established from the merger of four state institutions -- Bank Bumi Daya, Bank Exim, Bank Dagang Negara and Bank Bapindo.

Bank Mandiri president Robby Djohan said recently he planned to launch an IPO in October, hoping to raise some US$1.5 billion.

The government recently completed the recapitalization of the bank. (rei)