PT Bank Bukopin Tbk, a medium-sized bank in Indonesia, plans to raise 2 trillion Indonesian rupiah in the second or third quarter to expand its loan portfolio, a senior executive said.
The Jakarta-based bank is considering a rights or subordinated debt issue, Meliawati Mail, vice president of investor relations, told S&P Global Market Intelligence.
The new funds will be used to expand the bank's microfinance and consumer lending businesses, Mail said. None of this funding will need to go toward regulatory capital, she added. The lender's core Tier 1 capital ratio stood at 15.7% as of September 2017, well above the national statutory minimum of 11.25%.
"Typically, if a bank's Tier 1 capital ratio is already very strong, it can choose to raise cheaper subordinated debt or even short-term commercial paper to meet its funding needs," said Ivan Tan, a Singapore-based analyst at S&P Global Ratings.
Funds raised from a rights issue can be a part of a bank's Tier 1 capital, while money raised from subordinated debt is essentially a loan and counted as Tier 2 capital.
Bank Bukopin falls into the so-called BUKU 3 category of Indonesian banks.
Indonesia classifies banks into four categories, or BUKU. BUKU 1 is the least-capitalized category, which requires up to 1 trillion rupiah of core capital, while BUKU 4 requires more than 30 trillion rupiah. Banks in lower BUKU are subjected to more operational restrictions, such as limits on lending.
As loan growth in Indonesia is expected to pick up this year amid economic recovery, some smaller banks that are sufficiently capitalized, such as Bank Bukopin, are looking to capture more lending market share. Also, they tend to be more active in the capital market compared with their bigger state-owned peers, which are able to lean on their large depositor bases for growth.
Eko Rachmansyah Gindo, who took over as Bank Bukopin's president director in early January, had projected loan growth of between 5% and 10% in 2018, The Jakarta Post reported Jan. 30.
Other smaller lenders such as PT Bank Kesejahteraan Ekonomi, PT Bank MNC Internasional Tbk and PT Bank Harda Internasional Tbk have unveiled plans to raise fresh capital via rights issues this year, DealStreetAsia reported Feb. 1, citing local publication Kontan.
As of Feb. 6, US$1 was equivalent to 13,555.00 Indonesian rupiah.
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