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CIMB to Sell Bonds With Focus On Loans
Ivan Dasa Saputra | November 23, 2011

Bank CIMB Niaga posted an almost 30 percent jump in net income in the first quarter, riding a boost in the gap between earnings from borrowers and interest paid to depositors. (Antara Photo) Bank CIMB Niaga posted an almost 30 percent jump in net income in the first quarter, riding a boost in the gap between earnings from borrowers and interest paid to depositors. (Antara Photo)
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Bank CIMB Niaga, Indonesia’s fifth-largest lender by assets, plans to sell Rp 1.5 trillion ($167 million) in fixed-rate bonds next month, aiming to raise funds to boost its lending capacity.

The bank, majority-controlled by Malaysia’s Khazanah Group, will offer three- and five-year bonds to investors from Dec. 19 to 20, with a planned listing on the Indonesia Stock Exchange on Dec. 27, the lender said in a brief prospectus published in Investor Daily on Wednesday.

Proceeds from the debt sale will be used to increase the bank’s loan disbursements. The Indonesian lender has hired its subsidiary, CIMB Securities Indonesia, to help it sell the notes.

CIMB Niaga set the coupon range on its three-year bonds at 6.75 percent to 7.75 percent and the five-year bonds at 7.75 percent to 8.75 percent, said Arwin Rasyid, the bank’s president director. He did not provide details on the size of each tenor relative to the Rp 1.5 trillion total offering.

The rates are higher than comparable yields for government securities — 5.3277 percent for three-year bonds and 5.5723 percent for five-year bonds, according to the Indonesia Bond Pricing Agency.

Low borrowing costs are prompting consumers to take out loans for purchases of homes and property.

The central bank earlier this month cut its key interest rate to a record low 6 percent. Bank Indonesia has forecast the lending growth of the country’s 120 commercial banks to increase as much as 24 percent next year, almost the same pace as estimated lending growth this year.

CIMB Niaga’s primary lending activity is for mortgages. Its competitors include Bank Tabungan Negara, one of four state-controlled lenders that focus primarily on mortgage lending.

CIMB Niaga and other Indonesian lenders, such as Bank Internasional Indonesia, are selling bonds this year to capitalize on low borrowing costs in an economy where private consumption accounts for about two-thirds of economic activity.

Bank Internasional Indonesia, a local unit of Malayan Banking, Malaysia’s largest lender, plans to sell Rp 2.5 trillion in December. The lender said the coupon on its bonds would be set between 7.75 percent and 10.75 percent.

CIMB Niaga employs 12,932 employees at 155 offices and 442 supporting offices across the country. Shares of Bank CIMB Niaga fell 2.3 percent to Rp 1,250 on the exchange on Wednesday. They have fallen 35 percent this year.

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