NISP to complete stake sale by June, says top executive

NISP to complete stake sale by June, says top executive

Aloysius Unditu and Claire Leow, Bloomberg/Jakarta

Indonesia's PT Bank NISP may complete the sale of a 28.5 percent
stake to Oversea-Chinese Banking Corp. by June, handing majority
control to the smallest of Singapore's three lenders, President
Director Pramukti Surjaudaja said on Thursday.

Oversea-Chinese, known as OCBC, will boost its stake in
Indonesia's 11th-largest lender to 51 percent after the purchase.
It paid S$119 million (US$72.4 million) to buy 22.5 percent of
Bank NISP last year.

The ownership change may help Bandung-based Bank NISP fend off
increasing competition and expand its business. OCBC gets a
chance to tap a market of 235 million people, 10 times more than
Singapore and neighboring Malaysia combined.

"OCBC will ensure our existence, help us to weather future
turbulence," said Surjaudaja, 42, whose grandfather founded the
lender with a Dutch partner in 1941, four years before Indonesia
gained independence from Dutch colonial rule. "It's good for the
customer, for employees and investors."

Bank NISP shares more than doubled in 2004, outpacing a 45
percent gain in the benchmark Jakarta Composite Index, according
to data compiled by Bloomberg.

The additional stake in NISP was yesterday valued at Rp 907.2
billion (US$97.76 million), or Rp 770 a share, on the Jakarta
Stock Exchange. NISP may sell the stake for Rp 750 a share, or
twice its book value, said Irvin Patmadiwiria, who helps manage
$232 million at PT Batavia Prosperindo Manajemen in Jakarta.

NISP is facing increasing competition as bigger rivals such as
PT Bank Mandiri, Indonesia's largest bank, PT Bank Central Asia
and PT Bank Rakyat Indonesia try to tap rising demand for credit
in an economy forecast by the government to grow 5.5 percent in
2005, the fastest in nine years, from an estimated 5 percent last
year.

Companies and consumers are borrowing more to invest and spend
after interest rates fell in 2004 to the lowest in six years.
Consumer spending makes up about 70 percent of Indonesia's $208
billion economy.

"Since many Indonesian banks are boosting loans to consumers
and small and medium-sized enterprises, NISP will have to face
tough competition," said Winston Sual, who helps manage about $1
billion of Indonesian assets at Panin Asset Management in
Jakarta. That will erode profit margins, Sual said.

NISP earned Rp 230 billion in unaudited profit in the first 10
months of 2004, up from Rp 129 billion a year earlier, it said in
a statement on Dec. 21. Net interest income, or revenue from
borrowers after interest was paid to depositors, rose by almost
half to Rp 522 billion.

NISP plans to make Rp 3 trillion to Rp 4 trillion of new loans
this year, a third of them to small companies and to consumers
buying cars and homes. In 2004, it made about Rp 2 trillion of
new loans.

Still, profit growth will probably slow to 30 percent in 2005,
from an estimated 50 percent in 2004, Surjaudaja said. He's
concerned loans may become less profitable as the difference
between lending and deposit rates narrows.

"Because of the competition, our net interest margin will go
down," he said.

Oversea-Chinese may help the bank compete by introducing a
wider range of financial products and risk management skills, he
said.

NISP, which has total assets of Rp 15.4 trillion, wants to
become a lender capable of competing beyond its West Java base.
This would require about Rp 10 trillion of capital, five times
its current size, which would take the lender eight to 10 years
to achieve on its own, Surjaudaja said.

"Having OCBC as the majority owner will help us achieve our
goals faster, with more certainty," he said.