Bank Mandiri aims to cut bad-loan ratio to below 5 percent by 2007

Bank Mandiri aims to cut bad-loan ratio to below 5 percent by 2007

Aloysius Unditu, Blomberg/Jakarta

PT Bank Mandiri, Indonesia's biggest lender by assets, aims to
reduce its ratio of non-performing loans to below 5 percent by
2007, complying with a central bank requirement for banks that
will lead mergers and acquisitions.

"We are in the consolidation period now and we are targeting
to reduce the ratio to below 5 percent," Johanes Bambang
Kendarto, Mandiri's director for treasury, said in Jakarta today.

Mandiri had a net non-performing loan ratio, which excludes
the value of collateral pledged against credits that turned sour,
of 16 percent and gross non-performing loans of 25 percent as of
June 30 this year. Mandiri had gross non-performing loans of Rp
25 trillion (US$2.48 billion) as of the end of June 30, Kendarto
said

Indonesia's central bank, Bank Indonesia, is requiring a bad-
loan ratio of 5 percent or less for lenders to qualify as so-
called anchor banks that will lead mergers and acquisitions. The
government is trying to consolidate a banking industry it rescued
with a Rp 650 trillion bailout after the 1997-1998 Asian crisis.

Mandiri's bad loans increased after the central bank tightened
rules in January, Kendarto said. The central bank required
commercial lenders to classify as a loss any loan on which no
principal or interest has been paid for 180 days, reducing the
period from 270 days.

Loans to a borrower owing money to two or more banks will all
be considered bad should just one go into default.

Mandiri, whose name means self-reliance in Bahasa Indonesia,
was formed by merging four state banks -- PT Bank Bumi Daya, PT
Bank Dagang Negara, PT Bank Ekspor Impor Indonesia and PT Bank
Pembangunan Indonesia -- in July 1999.