BCA profit drops on lower interest<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
Bank Central Asia (BCA), the country's third largest bank in
\nterms of assets, said on Tuesday it had posted a 6 percent
\ndecline in its 2003 audited net profit due to a lower interest
\nincome.<\/p>\n
The bank said its profit had fallen to Rp 2.39 trillion
\n(US$281 million) from the Rp 2.54 trillion it booked in 2002. The
\nbank's interest income declined to Rp 12.18 trillion from Rp
\n13.99 trillion.<\/p>\n
BCA president Djohan Emir Setijoso said the lower interest
\nincome was mainly attributed to a lower income from government
\nrecapitalization (recap) bonds as the central bank had
\naggressively cut down its benchmark interest rate.<\/p>\n
He explained that the decline in the interest rate had heavily
\nimpacted on BCA because most of its recap bonds carried a
\nvariable interest rate, which is linked to the Bank Indonesia
\n(BI) rate.<\/p>\n
Floating rate bonds are considered too risky for a bank that
\nheavily depends on revenue from recap bonds, because their income
\nfrom interest is directly related to fluctuations in the central
\nbank rate.<\/p>\n
Of BCA's Rp 37 trillion in recap bonds, 93 percent carry a
\nfloating rate.<\/p>\n
The government recapitalized BCA with bonds in the wake of the
\nlate 1990s financial crisis.<\/p>\n
Last year, revenue from bonds contributed 39.2 percent of
\nBCA's income, with the remainder consisting of 26.15 percent from
\nlending and 34.65 from investment in Bank Indonesia SBI
\npromissory notes, fees and corporate bonds.<\/p>\n
In 2002, recap bonds contributed 61.4 percent, lending 18.9
\npercent and the remaining 19.7 percent from other income sources.<\/p>\n
Setijoso said the bank could not unload its unprofitable recap
\nbonds because nobody was willing to buy them, and that such an
\nattempt could even hurt BCA's profit further, as the price of the
\nbonds would plunge drastically.<\/p>\n
Despite a continuous decline in the BI? interest rate last
\nyear, the bank's third party funds rose by Rp 14.30 trillion to
\nRp 118 trillion, from 103 trillion in 2002. BCA's third party
\nfunds breaks down into 47.79 percent from savings, 21.42 percent
\nfrom demand deposits and 30.79 percent from time deposits.<\/p>\n
Setijoso explained that in an effort to minimize the impact of
\nthe declining interest rate, the bank had been trying to boost
\nlending. The bank's lending surged 36.44 percent last year to Rp
\n29.33 trillion, from Rp 21.50 trillion in 2002.<\/p>\n
He said BCA planned to disburse around Rp 9 trillion in
\nlending this year, mostly to toll road projects, resource-based
\nbusinesses such coal and crude palm oil, small and medium
\nenterprises and the consumer sector.<\/p>\n
According to BCA finance director Jahja Setiaatmadja, with an
\nincrease in lending and a gradual unloading of recap bonds, the
\nbank expected its net profit before taxes to grow by 10 percent.<\/p>\n
BCA, of which 53 percent is controlled by U.S. investment firm
\nFarallon Capital Management, plans to allocate about 50 percent
\nof its 2003 net profit toward dividend payments this year.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bca-profit-drops-on-lower-interest-1447893297",
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