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When KB Kookmin Bank controls Bukopin
Kookmin’s acquisition of Bukopin would also be rather easy and welcomed because Bukopin is a publicly listed bank, with 40.43 percent owned by the public, 23.39 percent by PT Bosowa Corp., 5.25 percent by Kopelindo, 8.91 by the Indonesian government and 21.99 percent by Kookmin itself.
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Banking affairs: A customer fills out a document at Bank Bukopin on Jl. MT Haryono in South Jakarta on Wednesday. The Financial Services Authority approved on Tuesday Bank Bukopin’s rights issue, the proceeds of which will be used for working capital to increase credit. (JP/Wendra Ajistyatama)
T
he Financial Services Authority (OJK) has been trying to accelerate the consolidation of the banking industry, which has long been overcrowded by weak small and mid-size banks, especially now under the pandemic-induced economic crisis.
And as the country is struggling with public health and economic crises caused by the COVID-19 pandemic, many of the banks have been facing liquidity pressures because many businesses made big losses and failed to service their loans.
Hence, the great enthusiasm of South Korean KB Kookmin Bank to take control of Indonesian mid-size Bank Bukopin should soothe the OJK’s worry, especially because Bukopin has been suffering severe liquidity pressures and even a bout of small runs by depositors over the past few weeks.
In fact, the Supreme Audit Agency had warned that OJK supervision of Bukopin’s performance for 2019 was quite inadequate, resulting in misleading reports to the public. As a mid-size bank, most of Bukopin’s customers have been micro, small and medium-scale businesses, which have been hardest hit by the pandemic.
The latest reports showed that Bukopin’s loans had grown 7.06 percent to Rp 66 trillion (US$4.5 billion) as of March 2020, with third party funds totaling Rp 72.63 trillion and a loan-to-deposit ratio of 90.92 percent, slightly over the 78.92 percent threshold. Bukopin’s net interest margin was 2.44 percent, far below the industry average of 4.31 percent, and its capital adequacy ratio was 12.59 percent, lower than the industry average of 21.67 percent. But its non-performing loans increased to 5.33 percent, slightly higher than the 5 percent ceiling.
Kookmin’s acquisition of Bukopin would also be rather easy and welcomed because Bukopin is a publicly listed bank, with 40.43 percent owned by the public, 23.39 percent by PT Bosowa Corp., 5.25 percent by Kopelindo, 8.91 by the Indonesian government and 21.99 percent by Kookmin itself.
Moreover, Law No. 2/2020, which governs the government’s response to the pandemic and its devastating impacts, gives a much stronger mandate to the OJK to consolidate the banking industry through mergers and acquisitions in a bid to reduce the number of commercial banks, which still total more than 100, in addition to the thousands of secondary rural banks
