The forced merger of three failed institutions to create Bank Mandiri, now Indonesia's largest bank, also spawned a new domestic securities house. Mandiri Sekuritas is half done in reaching its goals, reckons its management. Chris Leahy reports.
MERGERS OF COMMERCIAL banks are often fraught with difficulties and disapppointments, but piecing together an effective and profitable investment bank from the remnants of three securities firms is nigh-on impossible. PT Mandiri Sekuritas started life with just such an unappealing provenance: a mongrel operating in a business where pedigree is everything. The results, by Mandiri management's own admission, were middling to say the least. "When we came in the merger had already taken place," says Jeffrie Korompis, managing director of Mandiri and one of the key personnel recruited in April 2003 from local investment banking powerhouses Danareksa and Bahana to turn the firm around. "But the capital was only Rp38 billion ($4 million) and we only had 100 staff. There was no one in investment banking, no research coverage and capital markets was barely active."
By April 2003, Bank Mandiri, the firm's 96% shareholder, had had enough. "[Bank] Mandiri as a shareholder wanted to become a universal bank, to strengthen its services, especially in investment banking," says Korompis.
To demonstrate how serious it is, Bank Mandiri has thrown money at its subsidiary; too much in fact, according to Korompis.