PT Bank BNI plans securitization of nonperforming loans
PT Bank BNI plans securitization of nonperforming loans
JAKARTA (JP): Publicly listed state-owned PT Bank Negara
Indonesia (BNI) plans securitization of its nonperforming loans
(NPL) as part of its efforts to reduce its NPL ratio to the
maximum limit of 5 percent later this year, as set by the central
bank.
BNI president Saifuddien Hasan said that under the plan, BNI
would issue commercial papers to replace a portion of its NPL. In
return, investors receive payments from the owners of the NPL.
Hasan said that BNI's NPL, worth Rp 7 trillion (about
US$615.92 million), had led to an NPL ratio of 24.9 percent, way
above the 5 percent limit allowed this year under Bank Indonesia
regulations.
The NPL ratio measures a bank's nonperforming loans -- loans
whose principal and interest payments have been overdue for more
than three months -- against its total loans.
Hasan admitted that reducing the NPL ratio from 24.9 percent
to 5 percent within this year was a tall order.
"We're actually pessimistic about meeting that target, we'll
just have to try our best," he told reporters following the
bank's annual shareholders meeting.
With only six months left to achieve the target, Hasan said
the bank had still to work out the details of the securitization
plan.
He declined to say how much of the Rp 7 trillion in NPL BNI
planned to securitize, or the type of commercial papers it would
issue.
Securitization could be either through bonds, floating rate
notes, or intermediary notes, he said.
Despite the short time remaining, Hasan said early
calculations estimated that achieving an NPL ratio of 5 percent
this year was possible.
"It will largely depend on the economic conditions. If they
don't deteriorate then it's possible," he said.
He said economic conditions determined the debtors' corporate
performance and hence their debt servicing ability.
Aside from securitization, BNI also plans to unload another
portion of its NPLs through an asset management credit (AMC)
unit.
He said this wholly-owned subsidiary will be tasked with
restructuring the NPLs and selling them to distressed debt
investors.
The task equals that of the AMC unit at the Indonesian Bank
Restructuring Agency (IBRA), which takes over NPLs from local
banks.
To replace the NPLs, IBRA has injected the local banks with
government bonds under the bank recapitalization program. The
scheme allows banks to maintain the required minimum capital
adequacy ratio (CAR) of 4 percent.
CAR measures a bank's capital against its risked weighted
assets, which include loans.
Under the recapitalization program, the government via IBRA
has issued more than Rp 406 trillion worth of bonds to four
state-owned banks and over 20 private banks.
Last year alone, IBRA took over Rp 13.9 trillion in NPLs from
BNI. IBRA injected BNI with Rp 61.8 trillion in government bonds,
propping its CAR to around 14 percent.
Later, an independent due diligence by Arthur Anderson
concluded that the bonds issued for BNI were Rp 630.6 billion
larger than they should be.
Hasan said BNI planned to return the excess bonds to the
government, and pay back another Rp 34 billion in interest
payments earned from these bonds.
He said BNI's shareholders approved the plan, but the bank had
to await a response from its creditors.
"They (creditors) have 60 days to respond after we announce
the plan tomorrow (Tuesday)," he said, adding that if one or more
creditor insisted on rejecting the plan, the court would have the
final say.
For this year, Hasan said the bank plans to extend loans worth
at least Rp 3.4 trillion, lower than last year's lending of Rp
4.2 trillion.
As of May the bank had already channeled some Rp 2.7 trillion
into new loans, he added. (bkm)