While appearing glitzy from the outside, high prices and haunting political risks may force Bank Mutiara to eventually be sold at a bargain price this year.
Many Indonesians might recall the days of watching the House of Representatives’ inquiry sessions aired on prime-time national television, showing intense arguments with government officials over the Rp 6.76 trillion (US$743.6 million) bailout for ailing Bank Century in 2008 — the former name of Bank Mutiara.
By law, the Deposit Insurance Agency (LPS), which took over the bank as a 99.9-percent controlling stakeholder, was supposed to sell Bank Mutiara at the purchase price with an initial deadline of 2011, extendable twice, each for a year-long period until 2013.
The banking business relies heavily on trust, and Mutiara seems to have regained a degree of confidence after it was hit hard by scandalous accusations. Loans and customers’ funds stored at the bank have doubled through the course of 2008 to 2011 – higher than the growth of the domestic banking industry.
However, additional to the key financial ratios, the total amount of assets that need to be recovered from former debtors to make Mutiara more valuable are, seemingly, overwhelming.
The asset-recovery effort was worth Rp 6.8 trillion, more than half of Mutiara’s Rp 13 trillion assets in 2011, and could not be fully recovered, said the bank’s CEO Maryono. He said unrecovered assets still amounted to about Rp 2.5 trillion.
“This is not yet the time to sell at the [Rp 6.7 trillion] price,” Maryono told The Jakarta Post in an interview at his office, overlooking the luxurious Da Vinci apartment building in the bustling area of Sudirman, the financial hub of Jakarta.
The bank’s price-to-book value (PBV) ratio, which many investors look at when intending to acquire or purchase a company, was two times higher than its competitors. Mutiara’s equity, or book value, was Rp 1 trillion as per December 2011; therefore, selling the bank at Rp 6.7 trillion would turn the PBV to 6.7 times versus the national average banking industry PBV of 3 to 4 times.
“We will catch up on our equity in 2013. We expect to be able to divest [Mutiara’s 99.9-percent stake] at Rp 6.7 trillion,” Maryono said, targeting Rp 1.4 trillion book value next year, and Rp 1.2 trillion this year.
LPS marketing coordinator for Mutiara’s sales team, Sumaryo, said the “high selling price” was among the problems why the agency failed to sell Mutiara during the first offering last year. There were nine investors that had expressed interest in buying the bank, but only three came close to finalizing the deal.
LPS executive director Firdaus Djaelani said the agency would offer Mutiara for a second time at the beginning of the second quarter this year.
“Investors fear the political side of this [divestment],” he said in an interview. “We will keep offering several times until 2013; we will accept the highest bidder.”
Banking expert Paul Sutaryono said the “political content” in Mutiara exacerbated the high valuation, which turned off investors in purchasing the bank’s stake.
“Now the hope is on foreign investors. Counting on domestic buyers had no potential, especially state firms, because of the political content,” Paul said, urging the LPS to conduct a road show to the world’s financial hubs, from New York to Hong Kong, to lure investors.
Many observers, including Finance Minister Agus Martowardojo, instead urged state banks to earn the “good will” of acquiring Mutiara to help the lender grow prudently with good corporate governance.
Bank Mandiri, the country’s largest lender by assets, mulled buying Mutiara using its recapitalization bonds, which were acquired as liquidity support from the central bank in 1998 following the Asian financial crisis.
“Discounts are needed to attract investors, and that is for the LPS to think about,” Paul said.
Marciano Herman, a president director at Danareksa Sekuritas, which acts as financial advisor and broker to the strategic sale, said Mutiara had more than financial value for investors, which are 100 percent controlled by the lender.
“So we are eyeing investors that have other considerations than just financial, but rather free business strategy and control, whether due to the established distribution network and presence with the many branches,” Marciano told the Post.
“The consideration should be beyond dividends and capital gains.”
The two-year political tussle over the controversy surrounding the Century bailout will likely continue after the Supreme Audit Agency’s (BPK) audit results in 2010 and 2011 were deemed unsatisfactory by several lawmakers.
“From the very beginning, the decision to bail out Bank Century was based on political interests instead of academic or financial calculations. Therefore, the impact and end of this will also be political,” said lawmaker-turned-economist Ichsanuddin Noorsy, calling for a radical solution from policymakers and lawmakers.
Government officials and House members engaged in intense arguments over the bailout: Whether Mutiara had a systemic impact on the nation’s financial stability, while speculation arose that funds were channeled for President Susilo Bambang Yudhoyono’s 2009 presidential campaign.
“Now is the chance for the government to ask lawmakers to take the option that has the minimum risk and optimal reward. They would understand,” Ichsanuddin said.
Ichsanuddin coined the idea of turning Mutiara into a policy bank, either to boost agriculture or infrastructure, in a move that would benefit the people while at the same time minimize state losses if the divestment fails due to the high political sensitivity of the Century case
| 
|
|
|
|
|
|
|