Government plans IPO for BRI

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)