SINGAPORE, Oct. 13 - The Chairman of Indonesian Bank Restructuring Agency (IBRA) may be complaining about the political pressure he faces when selling assets and the poor law enforcement situation preventing him to recuperate some of money IBRA is owed by large debtors, but he is confident he will be able to sell off all of the banks under his watch, bar one, before the end of the year.
The last bank, Bank Permata, he expects to divest by February, at which time, IBRA should finally be closed down, with maybe only 5 percent of overall assets left on its book, which would then be transferred back to the finance ministry.
"Even if we have not completed the sale of Permata, the bank can be transferred back under the ministry of finance (too)," IBRA Chairman Syafruddin Temenggung told reporters on the side of the World Economic Forum's East Asia Forum, adding he saw no reason for IBRA not to wind down its operations in February.
IBRA is currently in the process of selling majority stakes in PT Bank Internasional Indonesia (BII), the sixth largest bank in term of asset, and mid-sized Bank Lippo, while also preparing an Initial Public Offering to sell Bank Rakyat Indonesia, for which it hopes to raise to raise $300-$400 million.
Temenggung confirmed he was unhappy with the quality of the bidders for Lippo Bank, as well as their bids. "When we divest the philosophy is that we are looking for the partners, not just the money," he said pointing that consortia should include commercial banks bigger that the bank they acquire. IBRA is selling its entire 52 percent stake in Lippo Bank, for which it hopes to get about $200 million.
Three consortia have come forward with preliminary non-binding bids, mainly investment funds. Batavia Services Fund II, the Philippines' Exports & Industry Bank, Singapore's Euro Capital Asia Ltd. and Euro Growth Fund have teamed for the first consortium; while Platinum Securities Co. from Hong Kong, which includes Summit Investment Ltd., Asia Financial Holdings, Platinum Investment Holding, Platinum Securities International, Granfort Holdings and Winpool are in the second consortium and Swissasia Global and Swiss First Bank AG in the third one.
Lippo Bank's bidders have now until October 23 to "strengthen" their consortium and come up with new bids. "I hope that they can do it. They understand what we expect and if they don't strengthen, then I think I could stop the divestment this year," he warned.
Meanwhile, the selling process of BII, which is expected to raise about $300 million, is progressing well, he said, on target to be decided by the end of the month. There are also three non-binding bids: One by Singapore government's investment arm Temasek Holdings, teaming up through its Asia Financial Holding fund with Kookmin Bank, South Korea's largest lender; one by United Overseas Bank Singapore and another by local bank PT Bank Pan Indonesia.
Temenggung said he was not concerned about the strong interest Singaporean banks were showing for their Indonesian counterparts, "as long as the partners meet our criteria they are welcome."
Earlier this year, Temasek teamed up with Deutsche Bank and bought a stake in Bank Danamon, Indonesia's fifth-largest lender.
Hubert Neiss, senior advisor at Deutsche Bank and a former senior official at the International Monetary Fund, pointed that the strong interest of international banks, including his own, for Indonesian banks was a testament to how much progress had been achieved since the Asian financial crisis.
Speaking earlier that day at a briefing, Neiss said the bank restructuring had been a "success story" although one that still needed to be completed.
He pointed that not all non-performing loans in the sector have been resolved, while much of the debt owed by large obligors to IBRA had yet to be collected. During the financial crisis, IBRA spend $50 billion rescuing banks, by taking on its books most of their non-performing assets and issuing bonds.
"The initial high cost of the banking restructuring has not yet been recovered at the level it should," Neiss noted.
Temenggung said IBRA was committed to push ahead with collecting the money but was hurting its head against the legal machine and difficult law enforcement. He promised the agency would give legal certainties for obligors that if they repay some of their debt they will be released from it.