Netherlands-based Indover moves to leave past depravities behind

Rendi Akhmad Witular, The Jakarta Post, Amsterdam

For Indover Bank, a specialized wholesale bank fully owned by Bank Indonesia (BI) but based in the Netherlands, it seems that few achievements have been made over the years other than the discrediting of its own name.

Years of inefficiency and allegations of the laundering of funds belonging to corrupt Indonesian officials, politicians and businessmen have long clouded the image of the bank.

But efforts are now in place to try turn things around, thanks largely to renewed commitment from the central bank and the government to maximize the functions of Indover and to prevent any past wrongdoings from reoccurring.

Bank Indonesia is currently in the process of transferring the ownership of Indover to the government through a state-owned bank, as required by the Central Bank Law, which bans BI from owning any business entities or subsidiaries.

The transfer must be completed by the 2009 deadline.

And with new management on board, the Amsterdam-based Indover is now slowly finding its feet as a financier for Indonesian trade-related businesses, especially exporters.

"To do this, improvements in financial performance are surely needed. We will attain this by turning around our business orientation by focusing more on supporting Indonesian exporters. That is actually our main objective," Indover's managing director, Chairy Hakim, told The Jakarta Post recently.

Chairy explained that getting the business back on track was necessary in order to address the bank's financial losses, its past performance, its main function and other past problems.

Indover, which now has assets worth some 800 million euros, was close to collapse following the Asian financial crisis. That was before BI intervened by injecting some Rp 3.5 trillion (US$370 million) as a provision to cover the bad loans the bank had extended.

Indover's non-performing loan (NPL) condition has since improved and now stands at less than 1.5 percent, lower than the 5 percent cap set by the central bank.

However, it still recorded a 10 million euro loss in 2005 and is pending completion of an audit of its 2006 books. Despite this, the bank has projected it will make a profit this year on the back of higher lending, of which corporate lending is estimated to grow by 110 million euros.

In another sign of improvement, the bank has recently gained the confidence of financial investors after securing US$100 million in syndicated loan facilities, which is aimed mostly at expanding its trade financing to Indonesian exporters.

The loans also mark Indover's attempts to reduce its prolonged dependency on the central bank, which has been pouring in expertise and trillions of rupiah in funding support.

"The bank should be able to raise funds from the public to be less dependent on BI funds. We have to get into the market and make ourselves known," said Chairy, who is a former executive of state-owned Bank Export Indonesia.

The loans, provided by nine international banks under lead organizers Bayern LB, Natixis, Commerzbank Aktiengesellschaft and Overseas-Chinese Banking Corporation Limited, have a one-year maturity period with interest rates of 50 basis points above LIBOR (London interbank-offered rate).

Chairy said the bank would raise more funds this year to refinance its matured debts and expand its intermediary functions. For instance in July, the bank plans to raise more than US$100 million in new syndicated loans in July.

Indover has an extensive network in the exporting gates of Europe and Asia, with branches in Hamburg, Hong Kong and Singapore.

Recently, Indover facilitated major trade financing for state-owned miner PT Timah, where it managed to help the company penetrate new markets in Hungary and arranged the payment for the Bangka-based firm.