S'pore's OUB sees more risk from Indonesia

S'pore's OUB sees more risk from Indonesia

SINGAPORE (Reuters): The head of one of Singapore's biggest
banks said yesterday Indonesia's escalating crisis had increased
the risk of bank lending there and would probably lead his group
to make further provisions for possible losses.

Peter Seah, the president and chief executive officer of
Overseas Union Bank Ltd, said the Indonesian political and
economic crisis, which has left at least 500 people dead, would
adversely affect economic growth in neighboring Singapore.

He said OUB was likely to make an announcement on its
provisions for the region in general, and for Indonesia in
particular, when it released its first half-year financial
results, due out in August.

"Clearly in the case of Indonesia, the risk has increased,"
Seah told reporters at the launch of a new unit trust.

"We will be reviewing the need for further provisioning. But
looking at the current state of affairs in Indonesia, I think
additional provisioning is likely."

Indonesia has been paralyzed by waves of demonstrations and
riots in the last few weeks as students and the poor of its big
cities protested against domestic price rises and vented their
anger against the authorities.

The price rises were imposed by the government as a condition
of a $40 billion economic bailout package led by the
International Monetary Fund (IMF) following the collapse of the
Indonesian currency, the rupiah, and spiraling corporate debt.

There have been growing calls for the resignation of President
Soeharto, who has led Indonesia for 32 years.

Seah said the downgrading by influential U.S. ratings agency
Standard & Poor's of some Indonesian sovereign and corporate debt
last Friday had been at least partly anticipated by his bank
earlier this year.

OUB has already made substantial provisions for bad loans in
Southeast Asia. In March, the bank set aside Singapore $316.96
million against its 1997 accounts, a sharp increase from S$83.21
million of provisions the previous year.

And he said OUB's Indonesian risk was "manageable".

"We have some exposure to state banks but non-bank risk is
less than S$200 million," he said. Bank risk was not much more
than S$60 million, he said.

By no means all Indonesian loans were doubtful.

"Even Indonesian loans come in varying qualities," he said.

Seah said it was too early to quantify how great the bank's
provisions for Indonesia would need to be. He said he would have
a better idea by the middle of the year and would assess the
situation again at the end of the year.

"This is not the right time to make a judgment," he said.

"Every morning when you wake up it is a new situation. So I
would rather see events play (themselves) out before making a
more professional judgment on Indonesia because it could range
from a very peaceful resolution to a very serious outbreak of
civil unrest," he said.

"I would rather not make a guess. Nobody can guess what is
going to happen," he added.

"But I would say definitely the developments would have a
negative impact on us. It is very difficult to measure it because
you are dealing with emotions," he said.