Profits attract foreign banks to Permata
Dadan Wijaksana, The Jakarta Post/Jakarta
A combination of the banking sector's great potential for growth and hefty earnings obtained from government bonds held by recapitalized banks are seen as the main factors behind the huge interest shown by investors competing for a majority stake in Bank Permata.
At least eight consortia, dominated mostly by top foreign banks, reportedly submitted bids to acquire the country's seventh largest bank in terms of assets.
British banks Barclays Bank Plc., Standard Chartered Plc., Singapore's United Overseas Bank (UOB), Australia and New Zealand-based ANZ Ltd., two Malaysian-based banks; Commerce Asset-Holding Bhd and Malayan Banking Bhd (Maybank), are all included on the list of contenders.
Barclays Bank is teaming up with Holland-based Rabobank and Bank Danamon, while ANZ is in partnership with Bank Panin.
On the domestic side, banking giants Bank Mandiri (teaming up with Bank Buana) and Bank Rakyat Indonesia (BRI) are leading the local consortia.
The government, which has a 97.17 percent stake in Permata, is trying to sell a 51 percent stake in the bank to raise cash to help finance the state budget deficit. Friday afternoon was the deadline for bidders to submit preliminary bids. The winner is expected to be announced in October or November.
"Aside from Permata's good showing so far, it (investors' interest) shows also that our banking industry has a lot to offer, as the loan growth is currently yet to pick up and it full stride," banking observer Ryan Kiryanto said.
Banking loans, albeit on the rise lately, have not yet reached their potential due to the slow debt restructuring progress in the corporate sector.
The suggestion was confirmed by Standard Chartered, which is making its third attempt to acquire a local bank here in as many years. With huge profits from its Asia operation, Stanchart has picked the nation's largest car maker PT Astra International as its local partner in acquiring Permata.
"We see Indonesia as a very high growth market and are looking to grow there," the bank spokesman Paul Marriage has been quoted by Bloomberg as saying recently.
As of the second quarter of the year, the central bank data showed that loan-to-deposit ratio stood at 45.6 percent, up from 43.2 percent in the previous quarter. Still, the ratio remains far below 70 percent to 80 percent recorded in the pre-crisis period.
The government injected massive amounts of bonds into the banking sector in the wake of the late 1990s financial crisis to help them stay afloat. The banks receive interest from the bonds.
Analysts said with around Rp 11 trillion worth of recapitalization bonds it holds, the temptation to acquire Permata, with its hefty annual earnings from the bonds, would be too hard to resist.
Iman Sugema of the Institute for Development of Economics and Finance (Indef) was of that opinion as well.
"While hopes are high that foreign ownerships could accelerate the implementation of best practices in the banking sector, we cannot rule out the possibility that they are coming here simply to enjoy the profit reaped from interest in the recap bonds in our banks," he said.