Six private banks agree to merge soon
Six private banks agree to merge soon
JAKARTA (JP): Six private banks -- Bank Aspac, Bank Indotrade, Bank Lautan Berlian, Bank Patriot, Bank Tata and Bank Uppindo -- will merge early next year to boost their performance.
Chief commissioner of Bank Aspac Thomas Suyatno told the media yesterday that the banks signed an initial agreement on the merger plan on April 3.
The plan was submitted to the Ministry of Finance on April 29, and "now we are waiting for approval from the government".
Thomas stated the Minister of Finance would likely give his approval after the banks had completed their due diligence in October this year.
Thomas said due diligence was now underway to assess the quality of the banks' assets and liabilities.
"Hopefully the new bank will start operations on January 2 next year."
He said the new bank, to be named Bank Asia Pacific, would have a capital adequacy ratio of 7.9 percent.
The capital adequacy ratio was higher than the 4 percent required by Bank Indonesia, the central bank, by the end of this year, he noted.
Total combined assets of the six banks as of June 30 were Rp 7.9 trillion and total equities were Rp 603 billion.
Thomas explained that shareholders of the banks had yet to inject fresh capital into the new bank to increase its capital base to about Rp 1 trillion.
"Shareholders of the bank will have to sell their own personal assets and convert them into equity in the new bank."
The new bank will have 91 branches across the country with 424 automated teller machines (ATMs).
He said all of the banks remained under the supervision of the Indonesian Bank Restructuring Agency (IBRA) after they obtained massive liquidity support from Bank Indonesia earlier this year.
He declined to mention the total liquidity support obtained by six banks.
But Thomas, who is also an executive of the country's National Private Bank Association (Perbanas), said the country's ailing banks had obtained a total Rp 140.44 trillion in liquidity support from the central bank as of July 29 this year.
"So in fact the government, through IBRA, now controls 70 percent of the assets of the country's banks."
He said the Minister of Finance had approved two options to extricate the banks from their troubles. One was to convert the liquidity support into government equity in the cash-strapped banks or convert the liquidity support into long-term obligations.
"Basically the Minister of Finance has agreed to partially convert the liquidity support into equity or all the liquidity support into equity."
He stressed the country's private banks would still have the option to buy back their stake from the government after the situation improved.
"Minister of Finance Bambang Subianto has agreed to the two possible solutions," he said. (aly)