M

id-sized lender Bank KEB Hana Indonesia plans to issue subordinate rupiah and US dollar denominated bonds to strengthen the bank’s capital structure and support its lending capacity.

Bank KEB Hana, which is part of South Korea’s Hana Financial Group, expects to raise up to Rp 800 billion (US$60 million) from the issuance of the rupiah bonds and $50 million from the US dollar bonds.

As one of the underwriters of the bond sale, Bahana Securities investment banking director Novita Lubis said the debt papers would be offered on Dec. 15 and Dec. 16. The bonds will be listed on the Indonesian Stock Exchange (IDX) on Dec. 21.

The bank has appointed Bahana Securities, Danareksa Sekuritas and Indo Premier Securities to be the underwriters of the bond offering.

“The rupiah bonds will carry a coupon rate of between 9.5 percent and 10.5 percent while the US dollar bonds offer a coupon rate of 5.05 percent to 6.05 percent,” she said during a press briefing on the issuance in Jakarta on Monday.

Both rupiah and US dollar bonds have a maturity period of seven years, she added.

Bank KEB Hana president director Lee Hwa Soo said the proceeds from the sale of the debt papers would be used to increase the bank’s lending, mostly to corporate borrowers.

In the first nine months, total loans from the bank reached around Rp 25 trillion, a 25 percent surge from Rp 20 trillion recorded by September last year. That compares with nationwide loan growth of 6.5 percent in the third quarter of 2016 year-on-year (yoy), Bank Indonesia (BI) data shows.

Bank KEB Hana director Bayu Wisnu Wardhana said around 60 percent of the loans were disbursed to small and medium enterprises (SMEs), while the other 40 percent were for corporate and commercials.

The bank hopes its loans will grow by 26 percent next year, slightly above this year’s 25 percent target, Bayu added.

The bank’s capital adequacy ratio (CAR) stood at 18 percent in the first half of the year, while commercial banks around the country recorded a higher ratio of 22.6 percent as of September, according to data from the Financial Services Authority (OJK).

In the January to September period, Bank KEB Hana posted Rp 33.8 trillion in total assets, a 21.2 increase from the Rp 27.9 trillion recorded in the corresponding period last year.

In addition, the bank also saw a high loan financing ratio (LFR), which was previously called the loan-to-deposit rate (LDR), of 150.78 percent, much higher than BI’s guideline of a healthy LFR of between 80 and 92 percent.

A bank must pay fines to BI in the form of a higher minimum reserve requirement (GWM) when its LFR reaches below the lowest threshold of the required range — or surpasses the highest threshold.

“We expect our LDR to decline up to 140 percent [next year] with the assumption that our third-party funds will grow by 30 percent,” Bank KEB Hana director Bayu Wisnu Wardhana said.

As of September, third-party funds totaled Rp 16 trillion, Bayu added, with total customers of around 170,000. By the end of the year, the bank hopes to book third party funds of Rp 17 trillion.

The lender will also allocate up to Rp 50 billion to open up eight more branches in Java, Sumatra and Kalimantan next year to obtain and serve more customers. So far, it has 53 offices spread across Sumatra, Java and Sulawesi. (wnd)