Bank Mandiri posts 27% increase in 2003 profit

Bank Mandiri posts 27% increase in 2003 profit

Rendi A. Witular, The Jakarta Post, Jakarta

The net profit of state-owned Bank Mandiri, the country's
largest bank in terms of assets, skyrocketed by 27.9 percent last
year, despite a 19 percent decline in revenue from interest.

The bank said on Wednesday it posted an audited net profit of
Rp 4.6 trillion (US$541 million) last year, up from Rp 3.58
trillion in 2002; although its income from interest dropped to Rp
25.55 trillion from Rp 31.87 trillion. It did not elaborate on
why this income had declined.

A summary of its financial report attributed the surge in
profit to the lower cost of funds, thanks to a sharp decline in
the central bank's benchmark interest rate.

Mandiri said that expenses for interest were down to Rp 17.55
trillion last year from Rp 25.01 trillion in 2002.

An increase in the bank's non-interest income, from fees,
commissions, foreign exchange gains and sales of securities also
lifted the bank's profit. Non-interest income surged by 3.1
percent to Rp 3.74 trillion from Rp 3.63 trillion.

The bank's capital adequacy ratio rose to 27.7 percent last
year from 23.4 percent in 2002, while return on equity fell to
23.6 percent from 26.2 percent.

The bank said its third-party funds declined 2.9 percent to Rp
178.8 trillion, as part of its attempt to reduce its costs.

However, demand deposits had surged by 17.4 percent to Rp 38.2
trillion, savings leapt 38 percent to Rp 41.3 trillion and time
deposits increased by 18.3 percent to Rp 99.3 trillion.

During last year, the bank has disbursed Rp 10.5 trillion of
lending funds, up by 16.1 percent to Rp 75.9 trillion of its
total lending. The lending was mostly channeled to the commercial
and consumer sectors last year.

Lending to the corporate sector made up 52 percent of the
bank's total lending portfolio, while lending to non-corporate
sector accounted the remaining 48 percent. In 2002, corporate
lending reached 63 percent of the bank's total lending, while
non-corporate lending accounted for only 37 percent.

Mandiri also reported that its gross non-performing loans rose
to 8.6 percent last year from 7.3 percent in 2002, as it had to
spare a provision to cover bad loans belonging to pulp and paper
company PT Kiani Kertas. The bank bought the loan from the
Indonesian Bank Restructuring Agency in 2001.

The bank had to provide the 139 percent provision to cover the
NPL exposure, or Rp 3.4 trillion, which is higher than the
maximum requirement set by the central bank, the bank said.

The bank plans to allocate 50 percent, or Rp 65 per share, of
its net profit for dividend payments. The allocation will be
approved during its annual shareholders meeting in May.

The government hopes to sell 20 percent of its shares in
Mandiri this year through a private placement, after selling a 20
percent stake through an initial public offering in the middle of
last year.