IFC invests $10 million into the listed Bank NISP

IFC invests $10 million into the listed Bank NISP

JAKARTA (JP): The International Finance Corporation (IFC), a
financial arm of the World Bank, said on Monday it had invested
US$10 million in equity participation at the publicly listed Bank
NISP.

IFC regional representative for Indonesia Amitava Banerjee
said the investment showed IFC's confidence in the battered
banking sector of Indonesia.

"Although small in amount, the investment is important to show
that an institution with a good reputation can still attract
foreign investors," Banerjee told reporters in a press meeting.

The IFC and NISP signed the agreement on Oct. 16, which
according to NISP, would allow the IFC to obtain a stake of up to
15 percent in the bank.

Banerjee said that in 1997, the IFC had already provided the
bank with $10 million in loans, of which under the current
agreement $5 million would be converted to equity.

The IFC, he went on, would then inject another $5 million in
fresh funds, to round up the total investment of $10 million.

Banerjee said that NISP's focus on small and midsize companies
was the main reason the bank was selected.

"It's (NISP) a well managed but medium sized bank supporting
small and midsize enterprises," he went on.

NISP president Pramukti Surjaudaja said that the $10 million
in funds would be entirely used to strengthen the bank's working
capital.

He said that although the bank's current capital adequacy
ratio (CAR) stood at 12 percent, far higher than the minimum
requirement of four percent, the bank needed assurance.

CAR measures the ratio of a bank's capital against its risk
weighted credits.

"In these times we never know for sure (the situation), so we
feel safer by having the funds," he explained.

During the crisis, many banks recorded a negative CAR as most
of their equity had been eaten up by a cycle of high spending in
an effort to maintain their third party funds.

Bank Indonesia now requires banks to raise their CAR to eight
percent by next year and 12 percent by 2002.

From the $10 million in the IFC's 1997 loans, Pramukti
continued, the bank had returned $4 million in principle
payments.

He said that of the remaining $6 million, the bank would only
have to pay $1 million, as the IFC had agreed to convert the
other $5 million into equity.

Pramukti said the bank would hold a right issue sometime later
this year to allow the IFC to raise its ownership to a 15 percent
stake.

He said that for the right issue, the IFC agreed to buy NISP's
stake at Rp 400 per share, higher than its current market price
of Rp 270. Pramukti could not elaborate on the bank's right issue
plan.

Founded in 1941, NISP booked a net profit of Rp 26.2 billion
($2.9 million) as of August this year, up from 1999's total net
profit of Rp 19.5 billion.

Banerjee further said that the IFC had been in Indonesia since
1968 with a cumulative investment of over $2 billion.

He added that since the early 1990s, the institution had
invested almost $900 million in loans and equity in various
companies.

"In the last couples of years we have not made significant
investments here in Indonesia," he said.

However, he said, looking at the opportunities ahead in the
next year, the IFC was expecting $150 million in new investments.

"We are looking quite aggressively at providing financing for
trade facilities," he went on.

Other areas that the IFC was looking at were resource based
export oriented companies, such as gold mining companies, mining
contractors, palm oil and textile companies, he said.

Banerjee added that the $150 million would come in the form of
a combination of loans and equity investments.

"Typically about two thirds to three quarters of our
investments are in the form of loans," he explained.

The IFC, he went on, saw itself as a catalyst investor which
required the cooperation of local financial institutions as it
usually contributed no more than 25 percent of a credit scheme.
(bkm)