Conglomerate Chairul Tanjung Wants Bank Allo, Ex-Bank Harda To Rise In Class

JAKARTA - PT Allo Bank Indonesia Tbk, plans to increase its capital to be able to enter the bank group with a larger scale. This bank from the Mega Corpora group belonging to the conglomerate Chairul Tanjung wants to go up in class.

The Cassava Boy alias Chairul Tanjung through Mega Corpora acquired the majority stake in PT Bank Harda Internasional Tbk (BBHI) since early 2021, and changed the name of the company to PT Allo Bank Indonesia Tbk. Mega Corpora also continues to strengthen Bank Allo.

The latest rules of the Financial Services Authority (OJK) classify banks into four Core Capital Bank Groups (KBMI). KBMI 1 is classified for banks with core capital of less than Rp6 trillion, then KBMI 2 for banks with core capital of Rp6 trillion-Rp14 trillion, followed by KBMI 3 for banks with core capital of Rp14 trillion-Rp70 trillion, and KBMI 4 for banks with core capital above Rp40 trillion.

Meanwhile, the regulation will be effective on October 31, 2021. In line with the plan to strengthen the capital, Bank Allo (BBHI) plans to seek approval from shareholders to issue new shares or rights issue. The plan is part of the agenda of the extraordinary general meeting of shareholders (EGMS) on October 15, 2021.

Based on the information disclosure of the Indonesia Stock Exchange (IDX), quoted on Monday, September 27, apart from asking for approval to hold a rights issue, the meeting is scheduled to set the price for the implementation of the corporate action.

"The purpose of increasing capital is to meet the criteria for Bank Group Based on Core Capital (KBMI) 2 in accordance with applicable regulations," wrote the BBHI Board of Directors.

Citing BBHI's financial report in June 2021, the total capital owned by BBHI is Rp317.22 billion. BBHI plans to issue 11 billion new shares with a par value of Rp100 per share. The proceeds from the rights issue will be used to strengthen capital in developing business activities in the credit sector with technological innovations or digital banks.

As for Bank Allo, on September 10, 2021, it just received approval for new products, applications, main systems, and support systems from the Financial Services Authority (OJK). The details are for digital banks in the form of deposit services, transfers, bill payments, payment services, account statements, and various other digital service features.

Throughout this year, BBHI's share price has moved in the price range of Rp157-Rp3,500 per share. With the planned issuance of 11 billion new shares, BBHI has the potential to raise funds of between Rp1.73 trillion to Rp38.5 trillion. The announcement of the rights issue some time ago immediately made BBHI's shares a bone of contention for investors.

Last month, OJK had just released three new OJK Regulations (POJK) which set out the prerequisites that must be met by digital banks. The provision contains an article that requires digital banks converted from conventional banks to have a minimum core capital of Rp3 trillion.

As of the end of June 2021, BBHI's core capital was only around Rp1 trillion. Regarding the rights issue as an effort to comply with the regulation, BBHI was also mentioned in the financial report published last month.

In the report, the company plans to increase its core capital of Rp5 trillion. Around Rp1 trillion of which was raised last year, and Rp1 trillion will be hunted in the second half of this year. Meanwhile, the remaining Rp3 trillion will be raised no later than the end of next year.

Apart from fulfilling regulations, additional capital is indeed important for the company. Especially, to move again its ability to distribute credit.

As of the end of June 2021, BBHI has indeed recorded customer deposits of Rp1.86 trillion, aka growing 8.98 percent from the achievement of Rp1.71 trillion year-on-year (yoy). However, the company has only disbursed loans of Rp889.28 billion, or a 40.21 percent decrease from the Rp1.48 trillion yoy.

The strengthening of the net interest margin or Net Interest Margin (NIM) has indeed succeeded in saving the company's performance on a top-line basis. This can be seen from the achievement of net interest income which skyrocketed to 80.76 percent on an annual basis, to be precise from Rp29.58 billion to Rp53.47 billion.

However, the swelling spending that emerged amid the company's plans to increase the digitization of services is inevitable. In the end, BBHI only posted a profit of Rp22.9 billion in the first semester of 2021, a decrease of 30.31 percent from the acquisition of Rp32.86 billion in the same period the previous year.