Bank Mandiri profit rising to Rp 2.5t

JAKARTA (JP): The giant state-owned Bank Mandiri expects gross profits to increase to Rp 2.5 trillion (US$269 million) this year from Rp 2.1 trillion last year, the bank's president, E.C.W. Neloe, said on Tuesday.

Neloe said that the bank would channel around Rp 4.5 trillion in new lending this year plus another Rp 7.5 trillion in corporate loans to be purchased from the Indonesian Bank Restructuring Agency (IBRA).

The government has allowed banks to exchange part of the government bank recapitalization bonds with the restructured loans under IBRA.

Speaking to reporters following a ceremony marking the cooperation agreement with national flagship carrier Garuda Indonesia, Neloe said that the bank was set to go public in September this year.

He said that the bank planned to offer 30 percent of the shares through an initial public offering (IPO).

But he said that the IPO plan would depend on market conditions and be subject to approval by the government.

Coordinating Minister for the Economy Rizal Ramli said late last year that Bank Mandiri was expected to be able to launch an IPO some time in the fourth quarter of 2001.

Bank Mandiri was formed in 1999 from the merger of four ailing state banks -- Bank Bumi Daya (BBD), Bank Ekspor Impor Indonesia (Exim), Bank Dagang Negara (BDN), and Bank Pembangunan Indonesia (Bapindo).

The government recapitalized the bank by injecting some Rp 178 trillion worth of bonds.

Neloe said that the bank's capital adequacy ration was now at about 23 percent.

Elsewhere, Neloe said that Bank Mandiri's overseas debt maturing this year totaled US$560 million.

But he said that the company had more than sufficient cash flow to service the debt.

He pointed out that Bank Mandiri had total assets of about Rp 228 trillion, and core equity of about Rp 6 trillion.

"The debt will not endanger Bank Mandiri ... We can repay it," Neloe said.

Separately, Bank Mandiri managing director Agus Martowardojo said that the bank was targeting to raise about Rp 20 trillion in third party funds this year.

"Raising third party funds will be our top priority this year," he said.

He said that the new government policy to increase the income tax on time deposits and savings from 15 percent to 20 percent would not hamper the bank's fund raising programs because the bank planned to raise the interest rate on its time deposits to lure depositors.

Agus said that the increase in interest rate would not cause a negative spread because the government bank recapitalization bonds held by the bank were mostly bonds carrying a variable interest rate.

Some analysts have said that higher interest rates on time deposits would hurt banks, particularly those holding government bonds carrying a fixed interest rate of 12 percent. (rei)