More mergers of banks anticipated

JAKARTA (JP): The country's banking sector will see more bank mergers in coming months, with about 20 private banks having confirmed their plans to merge their businesses into four entities.

The widely diversified Bakrie Group is expected to merge its four banks next month, the Tirtamas Group is preparing to merge its three banks and the Ramako Group also plans to merge its two banks into one.

Bank Bukopin announced yesterday it would merge with Bank Duta, while giant Bank Internasional Indonesia (BII) had begun its merger process with Bank Dagang Nasional Indonesia (BDNI) and three other small banks.

A reliable source said yesterday that Bank Danamon would announce their merger plan today with Bank Lippo and some smaller banks.

The government announced earlier that it would merge four state banks -- Bank Ekspor Impor Indonesia, Bank Dagang Negara, Bank Bumi Daya and Bank Pembangunan Indonesia -- into a single entity by July.

The government would also make Bank Tabungan Negara a subsidiary of Bank Negara Indonesia (BNI).

BNI president Widigdo Sukarman said last night that the planned merger of state banks showed the government's seriousness in strengthening the country's banking industry.

He also hailed merger plans among private banks, which he saw as a good indication of consolidation among private banks in time of economic difficulties.

"Say if 10 private banks merge into one bank, then we'll only have 20 private banks and three state banks. That would be good because we would have less banks, but more branches," Widigdo said.

Thomas Suyatno, head of the advisory board of the Federation of Private Domestic Banks, said Monday at least 50 private banks would merge into about 12 institutions by June.

Banking sources said more private banks would eventually be forced to merge as the government was expected to raise commercial bank's equity requirements by the end of this month to Rp 2 trillion (US$209 million) from the current Rp 150 billion.

When announcing the merger plan yesterday, Bank Bukopin's president Indra Kesuma said his bank's planned merger with Bank Duta would raise the merged bank's combined assets to Rp 11 trillion.

"We are still evaluating the merger plan and hopefully it will be finalized as soon as possible. We are still waiting for shareholders' approval," he said.

He said Bank Bukopin had assets of Rp 5 trillion last year while Bank Duta's total was Rp 6 trillion.

Nirwan D. Bakrie, chief commissioner of Bakrie Capital Indonesia, a finance subsidiary of the Bakrie Group, said the group would merge Bank Nusa Internasional, Bank Nasional, Bank Nasional Komersial (Bank Perniagaan) and Bank Angkasa into one bank next month.

Nirwan told Kompas daily that the merger would strengthen their capital and operations and also would support the government's program to strengthen the banking sector.

"The merger process will be discussed at the shareholders meeting of each bank, which will be held Jan. 24. If the meetings approve the plan, the merger will be realized next month," he said, declining to mention which bank would survive the merger.

Besides the four banks, the Bakrie Group has two other banks, Bank Tabungan Pensiunan Nasional (BTPN) and Maybank Nusa, a joint venture between Bank Nusa and Malaysian bank Maybank.

Nirwan said BTPN would not be included in the merger but would become a subsidiary of the merged bank, due to its specific market in financing in the retail sector.

Nirwan said the merger would increase the merged bank's paid- up capital to about Rp 1.4 trillion and total assets to Rp 6 trillion.

"The merger will also raise the capital adequacy ratio of the new bank to 25 percent, which is considered very healthy," he said.

BII said Sunday that it had signed a memorandum of understanding with BDNI to combine their businesses into one entity, which was also joined by Bank Tiara Asia and unlisted Bank Sahid Gajah Perkasa and Bank Dewa Rutji.

With the merger, BII president Indra Widjaja said BII would operate more efficiently, cut costs and increase profits. It would then invite international banks to join the merged bank as partners.

Sukamdani S. Gitosardjono, head of Bank Sahid, said the merger process would take about two to three months.

Three banks under the Tirtamas Group -- Bank Papan Sejahtera, Bank Pelita and Bank Kredit Asia -- are expected to merge this year.

The Ramako Group will merge Bank IFI and Bank Asta this year as part of the group's move to strengthen its banking business.

Indonesia still has more than 200 commercial banks after the government closed down 16 private banks late last year in the first tentative attempt in its reform package, arranged by the International Monetary Fund. (gis/rid)