BPI may bid for Indonesian bank

The Bank of the Philippine Islands (BPI) is reportedly thinking of bidding for PT Bank Permata Tbk, Indonesia’s seventh largest lender by assets and the last bank to be sold under a government divestment program intended to plug a widening budget deficit.

The Ayala-controlled BPI has expressed interest in the Indonesian bank, the Koran Tempo newspaper reported, quoting Ananda Barata, finance director of PT Perusahaan Pengelola Aset (PPA).

PPA is the Indonesian state agency in charge of the government’s asset disposition program.

However, BPI has yet to issue a statement on the matter as bank officials were not available for comment as of presstime.

Bank Permata was formed last year through a merger of five banks taken over by the government in the wake of the financial crisis of the late 1990s. It currently falls under the jurisdiction of the Finance Ministry.

The Indonesian government had said it plans to sell up to 71 percent of Bank Permata. It plans to initially offer strategic investors a 51-percent stake and will sell another 20 percent via a private placement in the market.

The government, which owns a total of 97.17 percent of Bank Permata, expects to name a buyer by December.

Based on PPA’s criteria, potential investors must be a commercial bank or part of a consortium led by a commercial bank. In either case, the commercial bank must have total equity at least equal to Bank Permata’s, which stood at 1.84 trillion rupiah, and assets worth 29.8 trillion rupiah as of end-March 2004.

PPA said it would sell Bank Permata for at least 1.8 times its 2003 book value, which would be about 1.6 trillion rupiah (roughly $174.4 million) for a 51 percent stake.

PPA earlier reported that 32 institutions, including 20 foreign investors, are interested in bidding for a controlling stake in Bank Permata, which is strong in small- to medium-sized commercial loans.

These include Standard Chartered Bank, which has teamed up with PT Astra International in a consortium; Singapore’s state investment arm Temasek Holdings Ltd.; Malaysia’s biggest lender Malayan Banking Bhd.; Singapore’s United Overseas Bank Ltd.; and Indonesian banks PT Bank Rakyat Indonesia; PT Bank Artha Graha; and PT Bank Panin.

The Indonesian government said the strong interest among investors reflects an improvement in Indonesia’s $208-billion economy, which is expected to expand 4.8 percent in 2004 and 5.4 percent in 2005, accelerating from the 4.5 percent growth last year.

Indonesia is selling banks and other distressed assets to raise funds to cover a budget deficit estimated at 24.4 trillion rupiah this year, or 1.2 percent of the country’s gross domestic product. PPA alone is tasked with raising 5 trillion rupiah in asset sales this year.

Moreover, Indonesian banks, which combined into 10 groups at the prodding of the government, are facing increased lending competition at home and declining profit margins as interest rates are at record lows.

Meanwhile, BPI and its subsidiaries have grown to become the second largest bank in the Philippines in terms of total assets, deposits and loans, mainly through a number of mergers and acquisitions, including the merger with Far East Bank and Trust Co. Inc. and Ayala Insurance Holdings Corp. in 2000.

Providing a broad range of consumer, institutional and investment banking and treasury management services, BPI and its subsidiaries form one of the leading universal banking groups in the Philippines through its main offices in Metro Manila and a network of 709 branches nationwide.

As of-end March this year, BPI’s total resources reached P413.95 billion while stockholders equity stood at P53.7 billion. Listed on the Philippine Stock Exchange, BPI had a market capitalization of P82.26 billion as of the same period.

Major shareholders of BPI include Ayala Corp., which holds a 35.1 percent interest, Development Bank of Singapore (20.4 percent), the Roman Catholic Archdiocese of Manila (8.7 percent) and Japan’s Sumitomo Mitsui Banking Corp.