Universal in merger talks with Danamon

Universal in merger talks with Danamon

JAKARTA (JP): Chairman of the Indonesian Bank Restructuring
Agency (IBRA) Edwin Gerungan confirmed on Monday that Bank
Danamon was in talks with Bank Universal to look into a merger
possibility.

But Edwin said that IBRA could not yet decide on whether to
approve the merger plan until the two publicly-listed banks
completed their talks.

"They are still talking... We can't decide until they complete
their talks," he told reporters, following a meeting with the
House of Representatives state budget committee.

Reports earlier quoted Bank Danamon's top officials as saying
that the bank was close to reaching a merger deal with Bank
Universal and that it was waiting for the green light from IBRA
to complete the merger plan.

IBRA, a unit of the finance ministry, has majority ownership
in some 11 private banks including Danamon and Universal
following the government's massive bank bailout program launched
in 1998 and 1999.

Bank Universal has been looking into a merger possibility with
a stronger bank in a bid to be able to meet the year-end minimum
of 8 percent capital adequacy ratio (CAR) requirement. Banks
which could not meet the CAR requirement are threatened with
closure.

Earlier this month, Universal was rumored to have merged with
publicly listed Bank Central Asia (BCA), but this was denied by
IBRA saying that the merger of the two banks was unviable as the
agency planned to sell its majority stake in BCA in the very near
future.

The merger of Bank Danamon and Bank Universal, if realized,
would be the first test case for the agency's plan to restructure
the country's weak banking sector in the post bank
recapitalization program.

Although the government has closed nearly 70 banks since the
financial economic crisis started in the middle of 1997, the
current number of local banks of around 150 is still deemed too
many.

IBRA has said that it planned to develop four huge "core
banks" with strong capital in a bid to restructure the weak
domestic banking sector.

The agency said that the core banks included two state-owned
banks and two IBRA banks. IBRA did not name the candidates for
the core banks, but it admitted that out of the 11 IBRA banks
only two were deemed suitable to become core banks.

Many said that Bank Danamon and BCA were the most likely
candidate to become core banks because of their relatively huge
size and strong capital.

Under the IBRA plan, the core banks would acquire several
smaller banks through a merger process.

IBRA has also said that smaller banks with strong capital
would be developed into special banks focusing on particular
market niches. (rei)