Permata Bank glitters like precious jewel

Dadan Wijaksana, Jakarta

They don't call it permata (jewel) for nothing. Bank Permata is glittering like a precious jewel.

The government's 71 percent stake in the bank, which is one of the assets the Indonesian Banking Restructuring Agency (IBRA) failed to sell, has drawn huge interest, not only from foreigners but also from locals.

The Asset Management Company (PPA), the state agency in charge of the sale of all assets left unsold by IBRA, has said 12 local investors, mostly banks, had declared interest in the nation's seventh largest lender, in addition to about 20 foreign investors.

The local firms include Bank Rakyat Indonesia (BRI), Mandiri, Panin, Buana, BCA, Danamon, Artha Graha and Niaga.

The bank has beaten out all other banks already sold by the government in terms of number of bidders.

The phenomenon is surely encouraging. But, questions remain as to whether the local firms could bring improvement to the bank, as some foreign investors have brought to domestic banks they bought.

IBRA has sold majority stakes in Central Bank Asia (BCA), Bank Niaga, Bank Danamon and BII to foreign investors, and the results have so far been encouraging as most of the banks have shown improved performance following the acquisitions, as proved by their financial indicators. (see table)

This is perhaps the main reason for some people to argue that foreign ownership in Permata would boost the bank's performance, in addition to a conviction that they have stronger financial backup.

Prominent figures, including the central bank's outgoing senior deputy governor Anwar Nasution and State Minister of National Development Planning Kwik Kian Gie, while welcoming the interest shown by local banks, voiced doubt about their financial capabilities to execute the acquisition.

Banking observer Ryan Kiryanto is of another view.

"I reject the idea that foreign bankers will automatically improve the bank's performance. It discredits local bankers. They (the performance of the four sold banks) have indeed improved, but so have most of others in our banking industry.

"With so many local banks interested in another local bank, it should prove that the banking sector as a whole has improved. This explains why only a few locals showed interest when previous bank sales took place -- which is because their condition was not as good as now," Ryan said.

With regards funds for the acquisition, the local banks could form a consortium if they did not have enough funds to acquire the Permata stake on their own, Ryan added.

"What's important is that they have to have strong financial support, be it on their own or via a consortium. It'd be a disaster if they turned out to be borrowing money, or maybe issuing bonds, to purchase the Permata stake."

Viraguna Bagoes Oka, a deputy director at the central bank's banking supervision division, has said that Bank Indonesia would welcome a local bank as the bid winner, as long as it had adequate capital and ensured that the acquisition, if materialized, would bring added value to the bank.

Financial Indicators of Sold Banks --------------------------------------------------------------

BCA Niaga Danamon BII

(B) (A) (B) (A) (B) (A) (B) (A) -------------------------------------------------------------- NIM 5.65 5.16 0.84 6.57 3.80 6.70 -0.19 5.54 ROA 3.36 3.19 0.37 3.70 2.00 3.80 0.41 3.17 LDR 16.06 25.06 45.96 73.55 51.50 54.10 19.39 39.87 NPL 3.15 1.31 8.82 3.90 4.40 4.70 9.02 7.04 CAR 32.64 30.35 16.58 13.63 25.30 38.30 32.21 23.28 -------------------------------------------------------------- B: Before divestment A: After divestment NIM: Net Interest Margin ROA: Return on Assets LDR: Loan to Deposit Ratio NPL: Nonperforming Loans CAR: Capital Adequacy Ratio Source: PPA