Indonesia's Bank Neo Commerce plans $191m rights issue next year

Indonesia's Bank Neo Commerce plans $191m rights issue next year

President Director Bank and CEO of Neo Commerce Tjandra Gunawan gestures during an interview at his office in Jakarta, Indonesia, November 3, 2022. REUTERS/Ajeng Dinar Ulfiana

Akulaku-backed lender Bank Neo Commerce plans to raise 3 trillion rupiah ($191 million) via a rights issue next year to support its loan disbursal targets and launch several new products, per an announcement on Wednesday.

Tjandra Gunawan, Bank Neo Commerce’s President Director and CEO, said existing investor Alibaba group will participate in the rights issue. However, the Chinese tech giant — through its entities Akulaku and Rockcore Financial Technology — can only increase its ownership in Bank Neo Commerce up to 40%, as foreign entities are allowed to own a maximum of 40% stake in an Indonesian bank.

Currently, Akulaku owns 25.39% of Bank Neo’s shares, PT Gozco Capital 14.13%, Yellow Brick Enterprise 5.17%, Rockcore Financial Technology 6.12%, and the public 48.24%.

After the rights issue, Akulaku’s ownership will increase to 29.03%, Gozco Capital’s to 16.76%, and Rockcore Financial Technology’s to 6.93%. On the other hand, Yellow Brick Enterprises’ stake will reduce to 4.58% and the public’s to 42.71%.

Therefore, Alibaba’s stake in Bank Neo Commerce will go up to 35.96% after the rights issue from 31.51% currently.

In an interaction with DealStreetAsia earlier, Akulaku CEO and founder William Li had said the company plans to increase its ownership to over 40% in Bank Neo Commerce.

The lender, meanwhile, has scaled down its initial target to raise 5 trillion rupiah of capital. “We planned to raise 5 trillion rupiah, but the market condition doesn’t support it,” Gunawan told reporters on Wednesday.

The rights issue will increase Bank Neo Commerce’s capital to 4.2 trillion rupiah, thereby surpassing regulator OJK’s minimum requirement of 3 trillion rupiah.

With funding from the rights issue, Bank Neo Commerce plans to launch productive loan products in the first quarter of 2023. “We have around 20 users, and some of them also have small businesses; thus we will support them with digital lending features,” he said.

It will also launch a wealth management feature on its app in the first half of 2023 to sell mutual funds. With this new feature, Gunawan hopes the bank will get new sources of income.

Currently, Bank Neo Commerce provides digital lending products to retail consumers and also collaborates with around 25 fintech players. 

The new features will help Bank Neo Commerce to swing back to profit next year, said Gunawan. In the nine months of 2022, the lender booked losses of 601.2 billion rupiah, an over two-fold increase from 264.74 billion rupiah in the same period of 2021. Its loan disbursements, however, surged 131.77% to 8.9 trillion rupiah from 3.84 trillion rupiah during the same period. 

“Our bottom line in 2022 has improved; we can book profit from June 2022 until September 2022. But for the full year of 2022, we are likely still to book losses,” Gunawan explained.

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