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State-owned Bank Negara Indonesia (BNI) managed to up its
profits in the year's third quarter, despite a decline in lending and
its long-standing problem of rising non-performing loans (NPLs).
The publicly listed lender, the country's second largest by assets,
booked after-tax profits of Rp 1.41 trillion (US$153 million) during
the first nine months of 2006 ending Sept. 30, the bank's president,
Sigit Pramono, said Wednesday. This represents an increase of 14
percent from the same period last year.
The higher profit came on the back of only a 4 percent increase in
BNI's interest income to Rp 5.62 trillion as its overall lending
slipped 3 percent to Rp 61.33 trillion due to still-sluggish loan
demand.
Additional profits came from a 43 percent increase in the banks's
fee-based income to Rp 1.86 billion.
BNI's profits failed to rise as much as they could have due to its
operating costs -- including the cost of funding its deposits and
savings -- increasing by 20 percent to Rp 3.64 trillion. The bank's
deposits and savings rose 13 percent to Rp 111.7 trillion, although its
net interest margin (NIM) -- the difference between its lending and
deposit rates -- was little changed at 5.46 percent.
The central bank has been cutting its key rate on easing inflation,
which may help the country's banks reduce their costs of funding and
boost the demand for loans. This could, however, be hampered if lenders
still opt to profit from high NIMs amid persistently weak public
purchasing power.
Based on the current lending and deposit figures, BNI's loan-to-deposit
(LDR) ratio declined slightly to 48 percent, although its assets
strengthened by 7 percent to Rp 157.8 trillion.
Its net NPLs, meanwhile, increased to 11.58 percent -- a total of Rp
10.8 trillion -- from 8.31 percent a year ago. The central bank
requires a maximum of 5 percent NPLs on the part of all banks.
However, Sigit was upbeat that BNI would wrap up the year in better
shape -- achieving its profit target on higher lending, and finally
coming to grips with its NPL problems.
"We will continue to improve our performance and our profits," he said.
"In terms of lending growth, we expect to increase our total lending to
some Rp 65 trillion by the year's end."
Regarding the NPL problem, Sigit said that as of Oct. 16, BNI had
finished the restructuring of Rp 3.4 trillion-worth of NPLs, and
expected that figure to increase to Rp 5.4 trillion by the year's end.
This would help bring down the bank's NPL level by some 2 percent.
The country's domestic banks have been affected by the recent high
inflation and interest rates, which have lead to increasing NPL levels.
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