Societe Generale bank still gloomy on RI's prospects

Societe Generale bank still gloomy on RI's prospects

PARIS (Dow Jones): French bank Societe Generale said yesterday that it fears the worst about Indonesia's political and economic prospects, despite having made large provisions already to cover its exposure to the country.

"We have every reason to fear the worst there," Jean-Pierre Marchand, Societe Generale's managing director for international operations, said in an interview with Dow Jones.

Indonesian President Soeharto has resisted many of the reforms requested by the International Monetary Fund, which has led to the suspension of IMF emergency funds to the country.

However, Indonesia has signed a proposal to restructure its private foreign debt, which it will present to the IMF, a senior Indonesian government official said earlier Thursday.

Societe Generale provisioned a total of FRF4 billion (US$653 million) for Asian risks in its 1997 accounts. The company has about $4 billion in South Korean exposure and $800 million in Indonesian exposure.

However, the bank has made it clear that it sees future risks emerging in Indonesia rather than in any other Asian countries which have been hit by the region's financial woes.

Chairman and Chief Executive Daniel Bouton said in the interview that he expects South Korea to rebound quickly, once its outstanding foreign debts have been reorganized.

Societe Generale represented French banks in the recently completed rollover of short-term bank debt between international creditor banks and their South Korean counterparts.

Of other countries in the region which have accepted IMF aid packages or undertaken IMF-style reforms, Thailand is "being a good student for now, but the Philippines and Malaysia are still under observation," Bouton said.

As a result, the bank has less to fear about its business in those countries. Societe Generale's newly acquired Asia Credit PCL unit in Thailand could be profitable immediately, Bouton said.

Bouton said: "If we provisioned enough, (our Thai operations are) profitable immediately because...despite a significant drop in banking volumes, margins are much higher."

Societe Generale took majority control of Asia Credit PCL in early March and said it will inject 2.75 billion baht into the Thai bank.