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.