BRI pre-tax profit to surge by 98%<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
State-owned Bank Rakyat Indonesia, the country's largest
\nmicrofinancing bank, said on Monday it was expecting to book a
\npre-tax profit of Rp 2.9 trillion (US$341 million) at the end of
\nthis year, up by around 98 percent from last year.<\/p>\n
BRI's corporate secretary Rochidayat Taepur told The Jakarta
\nPost the increase would mostly be attributable to the surge in
\nloan interest, which was estimated to contribute around 75
\npercent to the bank's total interest revenue.<\/p>\n
The remaining interest revenue would be from the government's
\nrecapitalization bonds, he said.<\/p>\n
Today, BRI is still holding around Rp 29 trillion in
\nrecapitalization bonds.<\/p>\n
\"We expect revenue from loan interest, rather than from
\nrecapitalization bonds, will boost our profit higher this year,\"
\nsaid Rochidayat.<\/p>\n
He said that the bank's operating income was estimated at more
\nthan Rp 7.5 trillion this year.<\/p>\n
Last year, the country's fourth largest bank, booked an
\noperating income of Rp 7.07 trillion and a pre-tax profit of Rp
\n1.46 trillion.<\/p>\n
BRI has been regarded by many analysts as the strongest state-
\nowned lender, thanks to its focus on extending loans to small
\nbusinesspeople, mostly farmers. Of the bank's Rp 43.6 trillion in
\noutstanding loans, as of June this year, 91.62 percent were
\nchanneled to micro-scale, small-scale and medium-scale
\nenterprises.<\/p>\n
Such loans have proven to carry little risk of default
\ncompared to loan exposure to large corporations. Small businesses
\nare regarded as being more conscientious in repaying debts than
\nlarge businesses.<\/p>\n
As a result, BRI currently has the highest return on equity
\n(ROE) in the banking industry at 45.6 percent, almost twice the
\nreturn booked by other banks on average.<\/p>\n
The government, which holds 100 percent of BRI's shares, is
\ncurrently in the process of selling part of its ownership in the
\nbank, via the initial public offering (IPO) scheme.<\/p>\n
The government is expected to generate around Rp 4.17 trillion
\nin proceeds from the selling of 4.76 billion shares, or 40.5
\npercent of total shares, at Rp 875 per share.<\/p>\n
The bank is in the process of offering its shares to retail
\ninvestors from Nov. 3 to Nov. 5. The shares will be listed on the
\nJakarta Stock Exchange and Surabaya Stock Exchange on Nov. 10.<\/p>\n
According to Rochidayat, the bank will allocate around 45.9
\npercent of its 4.76 billion shares to domestic investors, while
\nthe remaining 54.1 will go to foreign investors.<\/p>\n
The share offer has received a warm reception from domestic
\ninvestors, prompting speculations that the bank might increase
\nthe portion of shares for locals.<\/p>\n
However, Rochidayat explained that BRI decided to allocate a
\nlarger portion to foreigners because the bank's management was
\nafraid that domestic investors would use the shares for
\nspeculation at the local bourse, undermining the price of the
\nshares.<\/p>\n
\"From other IPO processes that we have observed, domestic
\ninvestors tend to buy shares for speculation and for short term
\ninvestment. Thus, we prefer foreign investors as they buy the
\nshares for long-term investment,\" said Rochidayat.<\/p>\n
For the 45.9 percent shares offered to domestic investors, BRI
\nwill allocate 5 percent to retail investors, 5 percent to the
\nbank's customers, 10 percent to the bank's employees and the
\nremaining 25.9 percent to institutional investors, he said.<\/p>",
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