Bank Mandiri first half net profit up 102%

JAKARTA (JP): The first half of state Bank Mandiri's unaudited net profit surged by a staggering 102 percent to hit Rp 1.54 trillion (about US$180.15 million) this year, from Rp 762 billion in the same period last year.

Bank Mandiri president E.C.W. Neloe said interest earnings from government recapitalization bonds made up 75 percent of the bank's net profit in the first half of the year.

"With government bonds reaching Rp 170 trillion, our earnings from there is, of course, huge," Neloe said, following an acceptance ceremony for Bank Mandiri's country award from Hong Kong-based Finance Asia magazine.

Thus far, he said, Bank Mandiri had extended loans of Rp 48 trillion.

"You can't compare earnings from Rp 48 trillion with that from Rp 170 trillion," he added.

Neloe said he was targeting a full-year net profit of Rp 2.5 trillion.

He said he hoped to reduce Bank Mandiri's non-performing loan ratio to 3.5 percent by the end of this year, but added the bank was likely to achieve only 5 percent.

In total, Bank Mandiri's net interest income for the first semester was Rp 3.31 trillion compared to Rp 3.01 trillion in the same period last year.

During the same period, non-interest income fell to Rp 539 million compared to Rp 629 million the year before.

Bank Mandiri's 102 percent surge in net profit is also due to the absence of provisions made to possible losses on earnings assets, and income taxes.

Combined, the two provisions made last year reached Rp 1.63 trillion compared to Rp 120 million this year.

The bank's deposits grew by 12.7 percent to Rp 174.2 trillion as of June 30, from Rp 154.54 trillion in the first half of last year.

"We have managed to improve the efficiency of our operations, as seen from the cost income ratio, which has improved from 37.1 percent to 34.8 percent," Neloe said in a statement.

The bank's capital adequacy ratio (CAR) grew slightly to 29.08 percent in the first semester from 28.11 percent the year before.

Plans to acquire the ailing publicly listed PT Bank Internasional Indonesia (BII) this year will offset some of the CAR gains, Neloe said earlier.

Bank Mandiri, which will take over BII's non-performing loans, is conducting a due diligence on the acquisition.

Asked whether Bank Mandiri would assume the payment of $70 million in BII debts due to mature this year under the 1998 Frankfurt debt rescheduling deal, Neloe said the decision depended on the due diligence of BII.

"We expect to finalize the due diligence this month and there will be further negotiations after that," he said.

The bank will negotiate the acquisition with the government, which took over BII to save it from being closed.

Neloe said earlier that he preferred to pay the acquisition with recapitalization bonds.

Bank Mandiri owes debts worth $300 million under the Frankfurt deal, which Neloe said it would pay with its cash flow.

He also said he expected to swap government bonds with assets worth Rp 4 trillion from the Indonesian Bank Restructuring Agency (IBRA) starting this month.

Assets in the form of restructured loans taken over by IBRA will ease the government's burden in paying interest on the bonds.

A large portion of the bank's recapitalization bonds carry coupon rates tied to Bank Indonesia's three-month promissory notes (SBI), which have been kept high to curb inflation and pressure on the rupiah.(bkm)