BI bracing for acquisitions and mergers amid consolidation drive

The Jakarta Post, Jakarta

The central bank, Bank Indonesia (BI), is evaluating separate acquisition proposals from four banks aimed at meeting BI's minimum capital requirement of Rp 100 billion (around US$10.63 million) by the end of 2010.

The four banks are Bank Harfa and Bank Anglomas International (Amin) from Surabaya in East Java and Bank Sinar Harapan Bali and Bank Sri Pharta from Bali, BI's director for banking licensing and information, Yang Ahmad Rizal, said Friday.

Bank Sinar Harapan Bali will be acquired by the nation's largest lender Bank Mandiri which will then inject new capital into the bank, while Bank Panin will acquire Bank Harfa, Yang said.

Mandiri recorded a 168-percent rise in net profit during the first nine months of 2007 to Rp 3.179 trillion from Rp 1.187 trillion in the same period of 2006. Panin, meanwhile, had total assets of Rp 44.6 trillion and a total capital of Rp 8.2 trillion as of June last year.

According to Yang, the acquisition is in line with the Indonesian Banking Architecture (API) blueprint, which aims to turn the country's crowded banking sector into an efficient industry, resulting in fewer banks with stronger capitalizations.

In 2007, BI required all 130 banks in the country to have a minimum capital of Rp 80 billion by the end of the year; otherwise the banks would be forced to merge with other banks.

By the end of 2010, however, all banks must meet the minimum capital requirement of Rp 100 billion.

"Before confirming acquisition approval, BI will scrutinize the four banks' documents and conduct fit and proper tests," Yang said.

"The four banks must submit their documents at the latest on March 31, this year, to get the central bank's approval."

Analysts expect mergers and equations to take place under the BI's API blueprint.

Next week, said Yang, BI would likely approve the merger between Bank Harmoni and Bank Index Selindo.

In September 2007, Bank Index Selindo's capital amounted to Rp 40 billion, while Bank Harmoni's stood at Rp 22.4 billion.

According to a BI regulation, banks that fail to achieve the minimum capital requirement by 2010 will only be allowed to operate as secondary or rural banks.

The central bank has also stated the same shareholders would be banned from owning a majority stake in more than one bank.

Malaysian state holding company Khazanah Nasional Berhad, which indirectly owns Bank Niaga and LippoBank, has announced it would pursue the option to merge the two banks. (adt)