Publicly listed PermataBank confirmed on Tuesday that its major shareholders would take part in the company'€™s upcoming rights issue to be carried out in the second quarter to strengthen its capital.

PermataBank'€™s extraordinary shareholders general meeting on Tuesday approved the bank'€™s plan to conduct a rights issue worth up to Rp 5.5 trillion (US$411.3 million) to support its expansion and comply with Basel III regulations.

The bank'€™s president director, Roy A. Arfandy, said the company'€™s two major shareholders, British lender Standard Chartered and diversified conglomerate Astra International, would share the commitment to absorb the shares released through the rights issue.

'€œWe hope that minority shareholders will take part in the rights issue as well,'€ he said after the meeting.

Standard Chartered and Astra each hold a 44.6 percent stake in PermataBank, while the remaining 10.88 percent is owned by the investing public.

With the rights issue, Roy said the bank would have total capital of around Rp 23 trillion to 24 trillion and maintain its capital adequacy ratio (CAR) at between 17 and 18 percent this year.

Tuesday'€™s meeting also agreed not to declare a dividend payment as the bank'€™s net profit would be booked entirely as retained earnings to strengthen the bank'€™s capital in anticipation of a higher CAR requirement in the future.

PermataBank'€™s net profit dropped by 84 percent year-on-year (yoy) to Rp 247 billion in 2015 as the country'€™s weak economy caused a rise in bad loans, which triggered a 212 percent jump in provision expenses.

Roy previously said that the bank conducted asset revaluation last year, which resulted in more than Rp 1 trillion in fresh funds and raised its CAR from 13.6 percent in September last year to between 14 and 15 percent by the end of 2015.

Asset revaluation is a tax incentive program offered by the government through its fifth economic policy package released last year.

The asset revaluation facility is offered in several stages, with the tax rate set at 3 percent before the year'€™s end, 4 percent from January to June 2016 and 6 percent from July to December 2016.

Meanwhile, Bank Indonesia (BI) and the Financial Services Authority (OJK) require banks to prepare more capital buffers as the country is expected to fully adopt the Basel III rules by 2019, based on a time frame set by the Basel Committee on Banking Supervision '€” an international association of banking supervisory authorities.

Roy added that the bank obtained Rp 1 trillion from BI'€™s monetary easing, which lowered the primary reserve requirement (GWM) by 1 percent to 6.5 percent last month.

However, despite having higher capital and more liquidity, Roy said the bank remained conservative with regard to loan growth as it was expecting 8 to 10 percent credit growth, as submitted in its business plan to the OJK.

He said PermataBank would be ready to revise its loan growth in June when the OJK opened a window for business plan revision, should the bank see significant improvement in the country'€™s economy.

The bank saw a 3 percent yoy decrease in loans to Rp 128 trillion in 2015, with gross nonperforming loans increasing to 2.74 percent from 1.7 percent a year earlier.

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