House wants better BTN after approving rights issue

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The House of Representatives approved on Wednesday Bank Tabungan Negara’s (BTN) plan to issue new shares in November that should bring in at least Rp 2.1 trillion (US$220 billion) of additional cash for the state-owned lender.

House legislators from Commission XI overseeing finance agreed that BTN needed extra capital to improve its performance, deciding that the lender was lagging behind its state-owned counterparts, such as Bank Mandiri, Bank Rakyat Indonesia (BRI) and Bank Negara Indonesia (BNI).

“BTN’s performance is not as bright as other state-owned banks. By approving the rights issue, we hope BTN will perform better in the future,” Commission XI head Emir Moeis said during a hearing with BTN’s executives.

The Indonesian government currently holds almost 72 percent of shares in BTN, while the rest are distributed among the public (22.5 percent), the Singaporean government (5.5 percent) and BTN’s board of commissioners (0.2 percent).

After the rights issue, government ownership will decrease to 60 percent, according to BTN president director Iqbal Latanro. “We will use the additional capital issue to strengthen our capital and expand our credit business,” he told reporters after the hearing.

In the first half, BTN disbursed Rp 72 trillion in loans, a 27 percent increase compared to the same period a year before. Housing loans are BTN’s core business, with mortgages accounting for 85 percent of total loans.

BTN has announced that this year it will focus on credit for the housing loan liquidity facility (FLPP), a government subsidized mortgage program for citizens who have never owned a house and earn less than Rp 3.5 million per month.

The lender plans to provide 50,000 FLPPs this year, up from its previous target of 16,000.

Indonesia recently saw a surge of demand for loans because of the middle-class boom. Banks operating in the country, including BTN, have responded to the situation by piling up capital to expand their loan business.

Besides issuing new shares, BTN also plans to boost its capital next year by issuing mortgage-backed securities, popularly known as KIK-EBA, and offering bonds, BTN finance and treasury director Saut Pardede said recently.

According to Saut, BTN will raise Rp 1 trillion of additional capital from mortgage-backed securities and Rp 2 trillion from bonds.

BTN’s capital adequacy ratio (CAR), a measurement of a bank’s capital strength, stood at 15.5 percent in the first half, still below the commercial banking industry average of 17 percent, but well above the Bank Indonesia (BI) healthy requirement of 8 percent. “We want our CAR to top 19 percent this year,” said Iqbal.

Three out of four biggest lenders in Indonesia are state-owned, namely Bank Mandiri, BRI and BNI. Meanwhile, BTN is ranked 10th.

The shares of the mortgage-dependent lender, listed on the bourse as BBTN, rose by 4.65 percent following approval of the rights issue, touching Rp 1,350 apiece as Wednesday’s trading closed at 4 p.m. (sat)