Bank BNI hopes to record modest profit in 2001

JAKARTA (JP): After returning to the black this year, state- owned Bank BNI hopes to book a Rp 1.4 trillion ($147 million) profit in 2001, largely by cutting back on the huge reserves fund it had built to cover non-performing loans (NPLs).

BNI President Saefuddin Hasan told reporters on Thursday that the bank had registered a total profit of Rp 220 billion between January and November.

The publicly-listed bank suffered a loss of Rp 13.26 trillion in 1999 when, like most other banks in the country, it was caught with piles of unpaid debts following the financial crisis of 1997.

Saefuddin said the size of BNI's NPLs turned out to be less than the earlier estimate of 33.5 percent of its Rp 31 trillion outstanding loans.

"This has enabled us to convert part of our reserved funds into income," he said.

BNI hoped to further cut the ratio of its non-performing loans to less than 15 percent in 2001, he added.

Saefuddin however tempered his optimism with a warning of the consequences for the banking industry amid renewed pressures for interest rates to increase.

Bank Indonesia (central bank) hiked the interest rate on its Bank Indonesia certificate (SBI) to 14.53 percent this week. The interest rate on SBI was 13.74 percent in November and 11.5 percent at the start of the year.

The hike in SBI interest rates could unleash a new round of competition among banks to increase deposit rates, he said. With lending rates unlikely to increase further, the industry would once again be forced to operate at a loss.

BNI, Saefuddin conceded, is particularly vulnerable to hikes in interest rates given that 40 percent of its assets are in fixed bonds paying interest rates of 12 percent.

The bank nevertheless would keep its deposit rates at the present level of 10.54 percent and its lending rate at 18 percent, he said.

Saefuddin said BNI hoped to increase its Capital Adequacy Ratio (CAR) to 18 percent in 2001 from 14.2 percent this year. (05)