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Jakarta Post

State banks turn to capital market for long-term funding

  • Tassia Sipahutar

    The Jakarta Post

Jakarta   /   Tue, March 10, 2015   /  06:25 am

State lenders Bank Mandiri, Bank Negara Indonesia (BNI) and Bank Tabungan Negara (BTN) are turning to the capital market to raise fresh funds this year to reduce their reliance on short-term funding.

Mandiri finance and strategy director Pahala N. Mansury said the bank was looking to issue mortgage-backed securities to generate Rp 1 trillion (US$77.02 million) worth of funds.

'€œWe are finalizing the plan as we speak and hope we can submit a permit application to the OJK [Financial Services Authority] at the end of March,'€ he said on Friday.

Mortgage-backed securities, known as KIK-EBA, are not common among investors.

So far, BTN has been the only lender to offer such securities and it has obtained more than Rp 5 trillion from the issuance.

Mandiri wanted to issue its KIK-EBA in 2014, but scrapped the plan because of unfavorable market conditions as yields soared. Pahala said that Mandiri was pretty confident the market would fully anticipate its KIK-EBA issuance this year.

'€œLast year, we wanted to combine our mortgage assets with our recap bonds, but now we are just going to focus on the mortgage assets. So the yield should be better,'€ he said, adding that the KIK-EBA transaction was expected to be carried out in the first half of the year.

Overall, its KIK-EBA plan is part of a larger securities issuance, aimed at generating a total of $800 million to $1 billion.

Meanwhile, BNI has also expressed its intention to enter the capital market.

It expects to book an equivalent of Rp 6 trillion from its foreign exchange-denominated bond issuance this year, according to its banking business plan submitted to the OJK.

BNI finance director Yap Tjay Soen said it was still evaluating the plan in more detail and that it hoped to complete the evaluation within the next six months.

BNI Syariah, its sharia bank subsidiary, is also eyeing the capital market, with Rp 500 billion to Rp 750 billion in targeted funds from its first-ever sukuk or Islamic bond issuance to be held before June.

According to BNI Syariah president director Dinno Indiano, funds from the sukuk would be used to finance its long-term financing portfolio, dominated by its mortgage loans.

'€œThis will help solve our mismatch issue because most of our funding comes from short-term time deposits, while we focus a lot on long-term housing financing,'€ he told The Jakarta Post.

The latest data from BNI Syariah shows that mortgages accounted for 43.9 percent, equal to Rp 6.6 trillion, of its total financing by the end of 2014.

Dinno said that its financing-to-deposit ratio (FDR), a measurement of liquidity, would fall to 93 percent after the sukuk issuance, from the current FDR level of 95 percent.

Separately, BTN treasury and asset management director Iman Nugroho Soeko said BTN would again offer its KIK-EBA in an attempt to raise Rp 3 trillion.

Besides the KIK-EBA, it also plans to issue another Rp 3 trillion-worth of conventional bonds.

It expects to realize both plans in the first half of this year.

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