Wed, 04 Jun 2003

Lippo posts loss ahead of divestment

M. Taufiqurrahman, The Jakarta Post, Jakarta

With its public sale scheduled for this month, Bank Lippo announced on Tuesday that it posted a net loss of Rp 506 billion (US$59 million) in 2002, as compared to a profit of Rp 270 billion in 2001.

Bank Lippo corporate secretary Widhayati Hendropurnomo told the management of the Jakarta Stocks Exchange (JSX) that last year's net loss was partly caused by the bank's operational loss of Rp 265 billion. The previous year the bank posted an operational profit of Rp 304 billion.

The bank's annual financial report for 2002 showed that its net income from interest dropped from Rp 1.02 trillion in 2001 to Rp 1.01 trillion in 2002.

Given the net loss, the bank's stockholders had to bear a loss of Rp 129 per share as compared to a Rp 69 profit for 2001.

The report also revealed that the bank's nonperforming loans increased by 3.27 percentage points from 9.11 percent in 2001 to 12.38 percent in 2002.

The government, through the Indonesian Bank Restructuring Agency (IBRA), holds a 59.3 percent stake in Bank Lippo and plans to sell a majority stake in June. The divestment is expected to be completed in October.

Bank Lippo was issued two warning letters by the JSX for its failure to submit an annual financial report on March 31 as scheduled.

Earlier this year, Bank Lippo was put under investigation by the Capital Market Supervisory Agency (Bapepam) after months of public outcry over alleged inaccurate financial reports issued by its management, which was alleged to be acting in favor of the bank's former owner -- the Riyadi family.

Separately, banking analyst Lin Che Wei said that Bank Lippo's poor performance was closely related to the government's plan to sell the bank.

He said the financial report was somewhat prepared as a prelude for the commencement of the divestment program in June.

"This report is the one that will be used as grounds for the planned divestment of Bank Lippo," he told The Jakarta Post.

The report should be seen from the perspective of the planned divestment program. The more deflated the book value, the cheaper it will be for a certain party to buy back the bank, he said.

He also said last year's loss was caused by the fact that Bank Lippo had allocated too much funds for the provision of losses from loans, something he said was unnecessary given the current trend of decreasing nonperforming loans.

Asked if the poor performance could further damage the bank's image, Che Wei said: "For now, who really cares about image. The new owner can mend it later."

The analyst said the 2002 financial report represented the performance of the bank's previous management.

"The question is who should be held accountable for the loss, the new or old management?" he asked.

Bank Lippo's defining moments

Nov. 28, 2002: Bank Lippo publishes its financial report in the mass media, stating the bank posted a net profit of Rp 99 billion and that it had a 24.8 percent capital adequacy ratio (CAR) as of September 2002.

Dec. 28, 2002: Lippo submits a second financial report to the Jakarta Stock Exchange, saying that the bank recorded a loss of Rp 1.27 trillion and had a CAR of around 4 percent over the same period as covered by the first report.

March 17, 2003: The Capital Market Supervisory Agency (Bapepam) imposes a Rp 2.5 billion fine on Lippo management for misleading the public.

March 28, 2003: The Ministry of Finance imposes sanctions on three appraisers and an auditor who conducted an appraisal of Lippo's assets and an audit of its financial reports. The sanctions ranged from written warnings to temporary revocation of their practice licenses.

April 15: A shareholders' meeting appoints Joseph Luhukay as the new president, but retains former controlling shareholder Mochtar Riady as chairman of the board of commissioners, a decision which analysts say could derail efforts to instill confidence in the bank.