Bank Niaga expects 20 percent growth in profit in 2005

The Jakarta Post, Jakarta

Bank Niaga, Indonesia's eighth largest bank in terms of assets, expects its gross profit before tax, which reached Rp 754 billion (US$79.45 million) in 2004, to grow by 20 percent this year, slower than last year's 69 percent.

President director Peter Stok said the bank would also have a higher tax liability in 2005, affecting the growth of its net profit, which grew by 41 percent to a record Rp 660 billion last year.

As one of the banks recapitalized by the government, Bank Niaga received a special tax treatment, which allowed it to carryover tax losses for five years.

As a result of the expiring tax provision, Stok said investors in the bank, which was recapitalized in 2000, should not expect net profit to grow anywhere near last year's rate.

"We'd have to work 24 hours a day non-stop, without a vacation (to achieve last year's growth)," Stok said after the company's annual shareholder's meeting on Friday.

Director Catherinawati Hadiman could not confirm whether the expected 20 percent growth in gross profit would translate to a double digit growth in the bank's net profit.

She said as a result of the tax provision, the bank would have to pay close to the 30 percent corporate income tax rate for 2005. According to its 2004 annual report, the company paid Rp 95.23 billion in taxes last year, or equivalent to 12.62 percent of its pre-tax profits of Rp 754 billion.

On the bank's plans to issue US$100 million in subordinated bonds, Stok, who has been at the helm of the company since June 2000, said the company would go ahead with its plans despite the recent cancellation of the Indonesian government's $1 billion bonds.

He said the company was planning a road show to Singapore, Hong Kong and London from April 21 to April 23 and hoped that investors would have strong interest in the bonds, which would allow the bank to expand its foreign currency credit and strengthen its capital structure.

Stok also said that the bank was planning to add 28 new branches this year on top of its existing 209. The company also plans to add between 300 and 400 people to its current workforce of 4,115.

Bank Niaga also agreed to pay out dividends worth Rp 132.1 billion, a 123 percent increase from last year's Rp 59 billion. The dividends, equal to 20 percent of the company's net income, will net each share about Rp 16.8.

Shares of Bank Niaga, which have been publicly listed since 1989, gained Rp 5 to Rp 510 on Friday.

The bank, established in 1955, has been controlled by the Malaysia-based Commerce Asset-Holding Berhad (CAHB) since late 2002. CAHB, which is Malaysia's second largest financial institution, owns 52.59 percent of Bank Niaga's shares, while the public and the government own 42.18 percent and 5.23 percent respectively.