BNI rights issue must be on schedule or out: Govt

State-owned Bank Negara Indonesia (BNI) must complete the preparation for its rights issue including the completion of the audited version of the bank’s third quarter financial report on Oct. 15, or the plan is canceled, a minister has said.

“We have decided to put the BNI rights issue ahead of Bank Mandiri’s, under one condition: BNI must be ready with its third quarter financial report by Oct. 15. Otherwise, they need to let go of the plan. It’s then or never,” State-Owned Enterprises Minister Mustafa Abubakar told reporters after a meeting with several ministers at the
Coordinating Economic Minister’s Office in Jakarta on Monday.

In response to the minister’s warning, BNI president director Gatot Suwondo said he was optimistic that the lender could meet the deadline. “BNI never breaks its promise. We are always ahead of other state banks in
terms of quarterly and annual earnings announcements, so of course [we are optimistic],” he told reporters at a separate event at the Finance Ministry in Jakarta on the same day.

Gatot, who is President Susilo Bambang Yudhoyono’s brother-in-law, said the audited version of BNI’s financial report would be completed by Oct. 15 and be announced afterward, on Oct. 18 or 19, ensuring the rights issue to be launched on schedule, or before the year-end.

Meanwhile, Mandiri chief financial officer Pahala Mansury said Sunday that Oct. 15 should be the latest day for BNI to file rights-issue documents, including the third quarter financial report, to capital market regulator, if it wants to receive a positive response from investors. “Stock market activities are seen to slow starting from the middle of December, as most market players go on new year holidays,” he added.

The two top banks in the country have previously expressed a firm commitment to launch rights issues before year-end in an effort to strengthen capitalization because both banks’ capital adequacy ratios (CARs) continue to slide due to a rise in their lending.

The move is in line with the government’s pro-growth agenda for banks to prioritize lending in hopes of helping businesses grow to spur economic growth in Southeast Asia’s biggest economy.

The plans sparked debates among market players as to how the market would react, because the two banks are seen to have overlapping investors. The nation’s largest bank by assets, Mandiri, and number four bank BNI, according to Pahala, have 16 percent of overlapping investors.

Gatot agreed with the notion, saying that market traffic would be “high” if the two banks conducted rights issues at the same time.

Mustafa said last week that the government had decided to put BNI’s Rp 10 trillion (US$1.1 billion) rights issue ahead of Mandiri’s because BNI needed to immediately increase its capital in order to be able to further boost its lending.

BNI’s CAR is about 13.3 percent, slightly higher than Mandiri’s 12.8 percent. But BNI’s lending growth is lower than Mandiri’s. BNI booked Rp 1.9 trillion in net profit in the first half of this year or a 61 percent increase compared to the same period last year, while Mandiri booked Rp 4 trillion in the same period, up 38 percent from last year’s first half. The two banks’ market capitalization is among the highest in the IDX. Mandiri’s capitalization reaches about Rp 147 trillion, far higher than BNI’s Rp 57 trillion. (est)