Lippo Bank posts wider loss ahead of planned divestment

Rendi A. Witular and P.C. Naomy, The Jakarta Post, Jakarta

Publicly listed Bank Lippo announced on Tuesday its net loss widened last year, at the same time the Indonesian Bank Restructuring Agency (IBRA) is attempting to sell 52 percent of the government's shares in the bank to strategic investors.

Lippo, which was formerly controlled by the Riyadi family, recorded a net loss of Rp 515.9 billion (US$61.4 million) last year, from a loss of Rp 506.4 billion in 2002.

Its revenue from interest income dropped by 27 percent to Rp 1.84 trillion from Rp 2.34 trillion. However, it still managed to post an operating gain of Rp 4.43 billion last year from a loss of Rp 264 billion in 2002.

The bank's capital adequacy ratio (CAR) declined to 17.9 percent from 21.1 percent in 2002. Non-performing loans (NPLs) declined to 8.8 percent from 12.4 percent in 2002.

Lippo shares were unchanged at Rp 575 on Tuesday.

Lippo president Joseph Luhukay said at a press conference on Tuesday evening that the drop in interest income was the result of a decline in Bank Indonesia's benchmark interest rate, which affected the bank's earnings from government recapitalization bonds.

He said the bank was unable to boost its lending activities to compensate for the decline because the company's operations had been disturbed in the first five months of 2003 by an alleged accounting scandal and the controversial plan of the former management to sell the bank's foreclosed assets.

The bank's fresh lending volume in 2003 declined to Rp 4.8 trillion from Rp 5 trillion in 2002.

The widening loss was also caused by carried-over costs resulting from taxes drawn from the bank's unsold foreclosed assets valued at Rp 2.5 trillion, said Joseph.

The bank had to allocate Rp 367 billion for the taxes.

But several analysts believe the bank's management intentionally maintained the loss to pave the way for certain parties to acquire the bank at a low price.

Lippo's management dismissed the accusation.

Fendi Susiyanto, a banking analyst from BNI Securities, said Lippo should have been able to reduce the loss and make a profit last year like other retail banks.

"It is rather odd ... Bank Niaga, Bank International Indonesia and Bank Danamon, which are in the same segment as Lippo, recorded a surge in net profit last year. But on the contrary, Lippo turned out to post a wider loss," said Fendi.

IBRA currently has a 54.9 percent share of Lippo, the country's 11th largest bank, while public investors own 35.5 percent. The remaining 9.6 percent is held by Lippo E-Net, controlled by the Riady family.

A consortium led by Swissfirst Bank AG, the only remaining bidder for the Bank Lippo stake, will have until Jan. 30 to submit its final bid.

The sale, which is expected to be concluded in mid-February, is the agency's second attempt to return the bank to private hands. The first effort failed to generate a reasonable offer, forcing IBRA to cancel the sale in October last year.

Meanwhile, Bloomberg reported on Tuesday that Swissfirst AG, Zentralbank Oesterreich AG (Austria's fourth biggest bank) and two other unnamed partners offered Rp 1.2 trillion (US$143 million) to gain control of Bank Lippo.

The consortium offered Rp 591.5 rupiah a share, meeting the minimum price set by IBRA for 52 percent in Bank Lippo, agency spokesman Rohan Hafas said.

Last week, the bidding parties offered Rp 403 a share, or a total of Rp 820.6 billion, for the Bank Lippo stake.