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.