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BNI plans to issue bonds to boost liquidity
Publicly listed Bank Negara Indonesia (BNI), the nation’s third biggest banks by assets, plans to issue bonds worth between US$200 million and US$300 million in a bid to boost liquidity and lending
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Publicly listed Bank Negara Indonesia (BNI), the nation’s third biggest banks by assets, plans to issue bonds worth between US$200 million and US$300 million in a bid to boost liquidity and lending.
“The exact pricing and timing of issuance of the sub debts will be determined by the condition of the market,” Bien Subiantoro, director of treasury of the bank, said on Thursday.
“We might even issue the bonds this first semester, if the market is good,” he added.
He said the state bank wanted to issue the sub debts overseas, and this was feasible because of the high spread on interest rates.
“For a period of five years, the LIBOR interest rate spread is very high,” he said.
LIBOR is a daily rate based on the interest rates used in the borrowing of unsecured funds from banks in the London wholesale money market.
Plus 600 to 700 basis points added on to LIBOR, would make an interest rate of around 8 to 9 percent, according to Bien.
“We may issue the sub debts (overseas) if the interest rate is below 5 percent,” he added.
In addition to the bond issue, BNI is also looking at the possibility of securing bilateral loans to increase its liquidity.
“We are negotiating with more than five foreign banks to discuss the possibility,” he said, without naming the banks or amount of loans.
With liquidity getting tighter, following the global trend, banks here are forced to be more selec-
tive in making new loans, while existing loans are under increased threat of turning bad. Many firms may have to struggle to pay up on their loans as weakening demand cuts earnings.
The central bank has forecast the banking sector will book around 18 to 20 percent growth in lending this year, far slower growth than the 30 percent booked last year.
BNI president director Gatot M. Suwondo has said that lending this year would likely grow by around 17 percent, down from an estimated 28 percent last year, on the country’s slower economic growth.
Indonesia’s economy may grow this year by between 4.5 and 5.5 percent, compared to an estimated 6.2 percent in 2007.
Gatot said also that lenders are likely to use loans equally both for working capital, and to expand trade financing .
The bank recorded Rp 110 trillion in outstanding credits by the end of last year. Last year, the US fourth largest bank, Wachovia Bank, agreed to provide a US$100 million loan to BNI. (fmb)
