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BCA to issue first tranche of Rp 500b junior bonds
Bank Central Asia (BCA), the country’s biggest private lender, plans to issue subordinated bonds to strengthen its capital structure as part of its obligation as one of Indonesia’s systemically important banks
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ank Central Asia (BCA), the country’s biggest private lender, plans to issue subordinated bonds to strengthen its capital structure as part of its obligation as one of Indonesia’s systemically important banks.
The publicly listed lender is hoping to attract Rp 1 trillion (US$71 milllion) in funds from the subordinated bonds, also known as junior bonds, which will be divided into two phases.
The first tranche of Rp 500 billion will be offered in tenors of seven, ten and 12 years. The book building period will start in May, followed by a listing at the Indonesia Stock Exchange in July.
The bonds come in three series, namely Series A with a coupon rate of 7.5 percent to 8.25 percent, Series B with a coupon rate 7.75 percent to 8.5 percent and Series C with a coupon rate of 8 percent to 8.75 percent.
“BCA is planning to issue subordinated bonds in order to meet its obligation to [develop] a recovery plan, as requested by the Financial Services Authority [OJK],” BCA vice president director Eugene Keith Galbraith said on Tuesday.
A new OJK regulation, released by the financial regulator in March, requires systemically important banks to set aside additional capital to strengthen their ability to absorb losses and protect themselves against bank failure.
The regulator requires banks to create a capital surcharge depending on their size, business complexity and inter-connectedness. The financial regulator divided the capital surcharges into five categories from 1 percent to 3.5 percent of risk-weighted assets.
Previously, BCA stated that the new policy would pose no problem, as it had a strong capital adequacy ratio (CAR) of 23.1 percent as of 2017.
Eugene claimed BCA had a strong financial performance with solid liquidity, with tier 1 capital accounting for 96 percent of its total capital as of the end of last year.
The lender plans to use some of the proceeds from the bond issuance to expand loan disbursement in all sectors. It hopes to attract both retail and institutional investors to its bonds.
“We are going to use the proceeds [from the bonds issuance] for loan disbursement for small and medium enterprises and other micro sectors,” BCA corporate banking director Rudy Susanto said.
In terms of financial performance, BCA recorded 14.9 percent year-on-year (yoy) loan growth in the first three months of 2018, much higher than its full-year projection of around 9 percent.
The loan growth was driven by the corporate and consumer segments, as credit demand had improved in various sectors, including infrastructure.
BCA finance director Vera Eve Lim projected that the bank’s credit disbursement would improve in the second quarter.
