Bank Danamon, the nation’s sixth-largest lender, aims to raise almost Rp 5 trillion ($58 million) from a secondary share sale to stockholders next month to fund loans to small enterprises and the automotive sector.
Danamon plans to sell 1.16 billion in new shares on Sept. 12 and has set the rights issue price at Rp 4,300 each, which is a 14 percent discount to last Monday’s closing price of Rp 5,000. The shares fell 3.9 percent on Monday.
The bank appointed Citigroup Global Markets Singapore and Deutsche Bank as standby buyers, the bank said in a statement on Monday. State-owned brokerage Danareksa Sekuritas was appointed as arranger.
“The share price fell as the rights issue price was lower than the current price,” said Joseph Pangaribuan, a banking analyst at Samuel Sekuritas. “However, in the long run, the market still thinks that the rights issue is a positive move,” he said.
The rights issue plan is subject to shareholders approval in a general meeting to be held on Wednesday. After accounting for underwriting costs, Danamon said the proceeds “will be fully used for giving loans to micro, small and medium enterprises and automotive firms.”
Danamon needs to ensure it has a good capital adequacy ratio (CAR) — a measure of a bank’s capital — as it spurs lending.
The bank posted a 31 percent increase in lending in the first two quarters of 2011, higher than the 23.4 percent growth rate recorded by commercial banks nationwide.
After the rights issue, the bank’s consolidated CAR will increase to 19.16 percent from 14.75 percent. The ratio is well above the central bank requirement of 8 percent.
Danamon’s first-half net income rose 3 percent to Rp 1.47 trillion from the same period last year. Outstanding loans in the six months to June surged 31 percent to Rp 92.8 trillion compared to a year earlier.
Analysts said the bank needs to address its declining net interest margin and reduce the cost of funding to boost profitability this year.
Its net interest margin — a measure of profitability that is the difference between what it gets from loans and what it pays depositors — dropped to 10 percent from 11.6 percent in the same first-half period in 2010.