State bank mergers to be finalized before next March
State bank mergers to be finalized before next March
JAKARTA (JP): Minister of Finance Mar'ie Muhammad said here
yesterday the state-owned bank merger process would be finalized
before the next cabinet was formed next March.
"We don't want to burden the next finance minister with the
merger problem. We have to finalize it during the next seven
months before the next cabinet starts its duties," he said at a
hearing of House Commission VII for finance, trade, cooperatives
and logistics.
At the hearing, commission members criticized the government
for the slow process of the state-owned bank mergers.
Mar'ie said the merger plan was approved by President
Soeharto, but the ministry had not decided how to do it yet.
"We're still working on it," he said.
He said the ministry was considering three ways of merging the
seven banks -- Bank Bumi Daya, Bank Dagang Negara, Bank Ekspor
Impor Indonesia, Bank Negara Indonesia, Bank Pembangunan
Indonesia, Bank Rakyat Indonesia and Bank Tabungan Negara.
He said the seven could be merged into new banks, some could
be merged into the others, or some could be made subsidiaries of
the others.
Laksamana Sukardi, an associate director the Econit economic
research group, said mergers were not the best way to improve the
performance of the state banks.
"I think the main problem is the state banks need to change
their mentality and to improve their entrepreneurial skills," he
said while presenting Econit's mid-year review 1997.
He said mergers would not improve performance unless the state
banks changed their outlook.
"The way to do it is by listing them on the capital markets,"
he said.
"Listing will force them to pursue efficiency," he said.
He said their mentality and business ability caused their
inefficiency, non-performing loans, inadequate management and
reckless banking practices.
As a result state banks' market share had decreased to about
30 percent from more than 80 percent 10 years ago.
"In five years their market share will drop to only five
percent unless they improve their performance," he said at the
presentation, which was also attended by Rizal Ramli, Econit's
other associate director.
According to Bank Indonesia (the central bank), the seven
state banks had combined total assets of Rp 213.3 trillion
(US$87.59 billion) and combined capital of Rp 13.3 trillion as of
the end of March.
Combined total credits extended by the seven state banks as of
March was Rp 111 trillion, and third party funds raised by the
banks stood at Rp 108.6 trillion.
Their combined before-tax profit for the first three months of
this year was Rp 2.7 trillion.
Minister Mar'ie said that some of the state banks were good
and some not so good. Because of this, the government felt it
necessary to pool their resources.
A central bank official who preferred anonymity revealed that
4.65 percent of the Rp 111 trillion credit extended by the seven
state banks as of March, or Rp 5.2 trillion, was classified as
bad loans. This represented a significant decline from their Rp
7.07 trillion bad credits as of last November. (bnt)