Bank Niaga net profit jumps 230%

The Jakarta Post, Jakarta

Publicly listed Bank Niaga has reported a more than 230 percent jump in 2003 net profit on the back of strong revenue from its lending operation.

The country's ninth largest lender said on Thursday its net profit surged to Rp 467.25 billion (US$55.29 million) last year from Rp 141.12 billion in 2002.

Net interest revenue, interest earned from borrowers after deducting interest paid to depositors, almost doubled to Rp 937.85 billion from Rp 478.87 billion.

Bank Niaga president Peter B. Stok predicted profits would grow by another 30 percent this year.

Many banks in the country have benefited from the aggressive decline in the central bank's benchmark interest rate, which allows banks to increase their loans to consumers at more affordable rates.

The economy, which grew by around 4.1 percent last year, has been primarily driven by domestic consumption, which in turn was fueled by the cheaper loans. The loans have pushed up demand for consumer goods and high-value assets like cars and real estate.

Like other banks, Bank Niaga is reaping a profit from the significant gap between its lending rates and the interest it pays on deposits. Currently, Bank Niaga's borrowing rates stand at between 13 percent and 14 percent per annum while its deposit rates stand at about 6 percent.

To reach its 2004 profit target, the bank would increase its new loans by around 30 percent from last year's outstanding loans of Rp 14.41 trillion, Peter said.

About two thirds of new lending will be aimed at the consumer sector and small and medium-sized businesses.

Third-party funds gathered by the bank last year amounted to Rp 19.33 trillion.

The loan-to-deposit ratio (LDR) in the same period reached 72.12 percent, a sharp increase from 59.57 percent in the previous year.

Peter said the bank was considering a rights issue that would raise funds to increase its capital adequacy ratio (CAR). Last year, the bank's CAR declined to 11.58 percent, from 12.72 percent in 2002, due to an increase in loan exposure.

The plan had yet to be approved by the shareholders, who would convene in April.

Bank Niaga, has a network of 16 branches and 3,559 employees. Its largest shareholder is Malaysia's Commerce Asset-Holding Bhd., which holds a 52.8 percent controlling stake.