Profits attract foreign banks to Permata

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.