Bank Central Asia Says Profit May Rise 10% on Loans
Bank Central Asia Says Profit May Rise 10% on Loans
Linus Chua and Bernard Lo
Bloomberg/Jakarta
PT Bank Central Asia, Indonesia's second-largest lender by
assets, expects 2005 profit to rise 10 percent as demand for
credit expands, President Commissioner Eugene Galbraith said.
The Jakarta-based bank, which lends 30 percent of its
deposits, in November forecast a 30 percent increase in 2004
profit to Rp 3.1 trillion (US$344 million). The lender expects
its loan-to-deposit ratio to double to 60 percent within three
years as it offers more mortgages, credit cards and other loans,
Galbraith said in an interview in Singapore.
"The loan-to-deposit issue is certainly an issue the bank is
aware of and we have been growing our loan books aggressively,"
Galbraith said. "The results continue to be encouraging. Next
year, the ability to grow further is quite significant."
Bank Central Asia and other Indonesian lenders are benefiting
from increasing demand for credit from consumers and companies in
an economy forecast by the government to expand as much as 5.5
percent next year, the fastest pace in nine years.
Bank Central Asia, a unit of U.S. hedge fund Farallon Capital
Management LLC, has Rp 35 trillion of outstanding loans,
Galbraith said. In the nine months ended Sept. 30, the lender's
net income rose 40 percent to Rp 2.34 trillion from Rp 1.67
trillion a year earlier.
Bank Central Asia has targeted extending as much as Rp 10
trillion in new loans this year, from Rp 9 trillion last year. It
expects to make Rp 4 trillion of new loans in the second half of
2004.
Since the start of the year, Bank Central Asia's stock rose 64
percent, more than the 42.5 percent gain for the benchmark
Jakarta Composite Index. The stock fell Rp 25, or 0.9 percent, to
Rp 925 at the close of trading today.
Three peaceful elections, including the first direct
presidential poll, have bolstered consumer and business
confidence in Southeast Asia's largest economy. Susilo Bambang
Yudhoyono, a former general, was inaugurated as the nation's
sixth president on Oct. 20, after he defeated Megawati
Soekarnoputri in a second-round run-off in September.
The government is counting on consumer spending, which makes
up 70 percent of the $208 billion economy, to help overcome a
slump in overseas investment.
"The Indonesian market has been picking up and with the
domestic consumption driving the economy, the sentiment has
improved a lot and banks will likely ride on that," said Pieter
van Putten, Singapore-based managing director of APS Asset
Management Ltd., which manages about US$600 million. "However,
what we don't see is foreign investments flowing back there yet."
Overseas investment approvals fell 30 percent to $3.76 billion
in the eight months ended Aug. 31, Investor Daily Indonesia
newspaper said on Sept. 16.
Increased spending on local projects may help counter the
slump in foreign investment, helping banks. In October, the Asian
Development Bank estimated Indonesia needs $150 billion of
investment in oil wells, factories and infrastructure during the
next decade to raise growth to an average 6.5 percent a year.
Bank Central Asia will probably benefit from increased
investment in public works projects, said Liny Halim, an analyst
at Macquarie Securities in Jakarta.
"The economic growth is just starting to accelerate and that
should continue to drive growth," said Halim, who has an
"outperform" recommendation on Bank Central Asia. The bank "has
the best deposit franchise and given that there will be more
corporate lending next year in the infrastructure sector and
other investments, that should drive loans growth going forward."