Indonesian Banking Sector: J Trust to Buy Bank Mutiara (Bank Century)
J Trust, a Japan-based company engaged in the finance, real estate, IT system, as well as amusement sectors, is reportedly buying Indonesia’s Bank Mutiara (formerly known as Bank Century). Bank Century made headlines due to a controversial government bail-out in 2008 amid the economic crisis when the bank was said to be on the brink of collapse (the impact of which would spread to other local banks). Bank Century then obtained a capital injection of IDR 6.7 trillion (USD $573 million) from the country's Deposit Insurance Agency (LPS).
However, many believe that this 2008 bail-out was heavily influenced by corrupted officials as no thorough analysis had been conducted into the financial fundamentals of Bank Century. In July 2014, Budi Mulya (former Deputy Governor of Indonesia's central bank) was sentenced to ten years in jail after being found guilty of self-enrichment and corruption in connection to this bail-out. According to the Court, Mulya had accepted an IDR 1 billion (USD $86,000) bribe from former Bank Century owner Robert Tantular in order to declare Bank Century a bank on the brink of collapse and thus making it possible for the bank to obtain the capital injection from the Indonesian government. Tantular was sentenced to five years imprisonment in 2009 after being found guilty of issuing USD $200 million in fraudulent loans as well as misusing depositors' funds (in 2010 this sentence was raised to nine years by the Supreme Court).
Since the bail-out in 2008, Bank Century (changing its name to Bank Mutiara) was run by the LPS. After a restructuring process, LPS started a public bidding process for the sale of its 99.996 percent stake in the bank in April 2014. J Trust has now been selected as the successful bidder according to information from the LPS. However, the country’s Financial Services Authority (OJK) still needs to approve the sale. Although there are no official data available, it is speculated that J Trust will pay USD $300 million for its stake in the bank. Bank Mutiara, which has 62 branches across Indonesia, has a total asset value of about IDR 13 trillion (USD $1.1 billion).
Although foreign ownership of Indonesian (commercial) banks is capped at 40 percent, this sale is granted an exemption by the government.
By acquiring Bank Mutiara, J Trust aims to tap Indonesia’s rising demand for retail finance. Although recently Indonesia’s economic expansion has slowed, its growth rate still outpaces GDP growth of most regional peers. As such, personal incomes continue to increase in Indonesia, which provides optimistic perspectives for retail finance in Southeast Asia’s largest economy.
J Trust is not new to Indonesia. The Singapore-based subsidiary of the Japan-based Group already has a strategic operational alliance with Indonesia’s Bank Mayapada Internasional.