StanChart unswayed by protests

StanChart unswayed by protests

Dow Jones, London

Standard Chartered PLC. said Thursday that it would stick by its bid for Indonesia's PT Bank Central Asia, despite employee protests reminiscent of those that scuttled its bid for another Indonesia bank three years ago.

Standard Chartered leads a consortium favored to win the bidding for a 51 percent stake in the nationalized BCA. On Thursday, about 500 workers gathered at Parliament in Jakarta to protest the sale of the bank, claiming the bidding process was unfair.

Paul Marriage, a spokesman for Standard Chartered, pointed out that Thursday's protest was against the bidding process, not specific bidders.

During Standard Chartered's 1999 bid for Bank Bali, employees scuttled the deal by protesting against a foreign bank taking over Indonesian assets.

Some workers in Jakarta on Thursday took a similar line, saying the bank is a national asset and the sale to a foreigner wouldn't help the local economy.

But Standard Chartered said the BCA auction is different from the previous Bank Bali bid in other ways, too. Standard Chartered is bidding as part of a consortium this time, for example.

"If we're successful with this bid, the existing management would stay in place," he said. "And there are no major staff retrenchment plans. The business plans of Bank Central Asia would continue. It's quite a different situation."

But others think that an Indonesian bid remains risky. Though there is significant growth potential in the banking system, there are other substantial risks, SG Securities said in a report published Thursday.

"Indonesia is, in our view, politically unstable, the legal system is undeveloped and the government has a high level of debt," SG said. SG analysts are concerned that BCA's 21,000 staff won't cooperate, like those of Bank Bali. SG also points out that Standard Chartered alone has about 30,000 employees worldwide, and BCA alone will add another 21,000.

SG estimates that a bid for BCA would value it at US$1.1 billion. BCA is the largest retail bank in Indonesia, with total assets of about $10 billion. It was taken over by the government from the Salim group in 1998, part of a $60 billion rescue of the banking system.

The Indonesian government is expected to announce within the next few weeks the winner from four bidders that submitted final offers in late January for a 30 percent stake in BCA.

The winning bidder will later have the right to buy a further 21 percent stake, giving it control of the bank.

Standard Chartered, whose consortium includes the government of Singapore, Prudential PLC. and PT Berca Indonesia, is the only foreign bank bidding for BCA, a factor that increases its chances of winning, observers say.

Both Standard Chartered and its critics agree that Indonesia offers considerable banking opportunity.

The country's population, the fourth-largest in the world, is very 'under-banked,' SG Securities said, and BCA has a large branch network, a good franchise and a relatively clean balance sheet.

Standard Chartered's Marriage said Indonesia remains one of the key targets in the bank's strategy.

"The scope for banking expansion within Indonesia is great," he said. "It's a market that presents a lot of potential for a bank like us."

He also pointed out that Standard Chartered has had a presence in Indonesia for over 100 years and has about 600 employees there already.

"As an emerging market bank, we're very used to operating in difficult markets," he added. "That's the type of banking we're good at."