Recapitalized banks show strong results
JAKARTA (JP): Nine private banks which have been recapitalized by the Indonesian Bank Restructuring Agency (IBRA) have shown strong performance during the first half of this year, according to the agency's deputy chairman, Jerry Ng.
But Jerry said on Thursday that despite the improvement in key indicators, the banks were not out of the woods yet.
"In general, all IBRA banks are moving on the right track with improvements in key indicators during the first half," he told a media conference.
"But we must remain alert because the problems are not yet over," he added.
Jerry dismissed criticism that the recapitalized banks had not yet resumed lending to the real sector, pointing out that the nine IBRA banks had channeled more than Rp 6 trillion (US$662.98 million) in new lending between January and May.
"This is an 18 percent growth compared to the level in December last year," he said.
The nine private banks which have been recapitalized by IBRA included the publicly listed Bank Lippo, Bank Internasional Indonesia, Bank Universal, Bank Danamon and Bank Central Asia, and private Bank Bukopin, Bank Arta Media, Bank Patriot and Bank Prima Express.
IBRA has recapitalized 10 banks, including publicly listed Bank Niaga in June. The agency is expected to recapitalize publicly listed Bank Bali in October, which would mark the completion of the country's bank recapitalization program.
The recapitalization program is aimed at boosting the banks' capital adequacy ratio (CAR) to beyond the minimum 4 percent level.
In addition to the private banks, the government has also recapitalized four state banks. Nine smaller private banks have been incorporated into Bank Danamon, prompting the government to finance the second recapitalization of Danamon to maintain its CAR above the minimum requirement.
Jerry said that the average CAR level as of June was about 10.35 percent.
He said that between January and May, the assets of the recapitalized banks increased 17 percent with deposits up 8 percent while nonperforming loans (NPLs) decreased from 30 percent to 27.5 percent.
Jerry said, however, that the banks were still being plagued by other problems, including assets held up mostly in government bonds, a low loan to deposit ratio (LDR) of only about 43 percent and the necessity of accelerating loan restructuring.
"The balance sheets of the banks are still mostly filled with government bonds," he said.
The government, via IBRA, a unit of the finance ministry, injected bonds instead of cash into the banks to finance the recapitalization program. The banks will receive cash from the interest rate of the bonds.
Jerry said that Minister of Finance Bambang Sudibyo's idea of swapping part of the recapitalization bonds for performing loans under IBRA, if realized, would aid the improvement of the balance sheets.
He pointed out that the interest rate of the bonds was now at about 12 percent, while the interest rate of bank loans was about 16 percent.
Bambang said earlier this week that the government was still designing the new policy.
He said that the total recapitalization bonds by October would amount to about Rp 430 trillion, and that was expected to be halved by swapping them for the IBRA loans.
IBRA now controls about Rp 250 trillion in NPLs. The agency is mandated to restructure the loans to make them performing loans again.
Jerry said that an improvement in the bank's balance sheets would be one way of lifting the current low LDR.
Indonesian banks were badly hit by the financial crisis that started in the middle of 1997. The government has closed down some 49 banks and has issued bonds worth more than Rp 600 trillion to finance the bank recapitalization and restructuring program.
Jerry said that the future landscape of the country's banking sector would consist of less than 10 large banks, dozens of small- to medium-size banks, and foreign banks.
He said that the current number of about 100 banks would continue to decline due to mergers and acquisition.
Jerry also said that the government effectively now controlled between 85 percent and 90 percent of the country's banking sector as a result of the recapitalization program.
The government has provided between 80 percent and 100 percent of the financing needs of the bank recapitalization program.
"So the government is in a unique position of designing the future landscape of the domestic banking sector," Jerry said.
He said that IBRA planned to seek approval later next month from the House of Representatives to divest ownership in four listed banks, including Bank Central Asia, Bank Niaga, Bank Internasional Indonesia and Bank Universal. (rei)