Wed, 03 Aug 1994

Three local banks agree to help Continental Bank

JAKARTA (JP): Continental Bank will get technical assistance from a consortium of three domestic banks to enable it to compete in the tight banking market, says an executive.

Continental Bank's president, Sugiantoro, said yesterday that the technical assistance agreement with the consortium comprising of Bank Utama, Bank Central Asia and Bank Danamon is "purely" related to banking know-how.

"We want to grow faster... We, therefore, should have more advanced technology," he told The Jakarta Post when he was asked whether the technical assistance was made as an initial step of the consortium to take over the bank.

A number of local banks have used technical assistance as a bridge to acquire ailing banks, such as Bank Danamon's assistance to Bank Sampoerna, which was formerly owned by the Sampoerna Group.

Sugiantoro also denied that the technical assistance was an effort to help Continental Bank's financial difficulties, pointing out that the bank's financial condition is within the healthy category set by Bank Indonesia (the central bank).

He said that Continental Bank, with total assets of around Rp 509 billion (US$242.38 million) as of March this year, has a capital adequacy ratio (CAR) of above eight percent, the minimum level set by Bank Indonesia.

"Our loan-to-deposit ratio is around 111 percent, a little bit higher than the maximum level of 110 percent set by the central bank," he said.

He said that the technical assistance to be provided by the consortium would cover the transfer of technology in such aspects as human resource development, lending and operational networks.

"Bank Utama has good lending expertise, Bank Central Asia is known for its good operational network, while Bank Danamon is good in human resource development," he explained the reasons behind the cooperation with the three banks.

The government has appealed small banks to merge to enable them to survive amid the fierce competition in the banking industry.

Minister of Finance Mar'ie Muhammad warned recently that the government would issue a ruling to force them to merge if they would not heed the appeal. (hen)