Bank Niaga wary of property sector

Bank Niaga wary of property sector

JAKARTA (JP): An oversupply of property and customers' current
low purchasing power have made the publicly-listed Bank Niaga
reluctant to provide loans to the property sector.

Director Paulus Wiranata said Wednesday that the slow increase
in the workers' salaries -- by an average of 7 percent per annum
-- had weakened their purchasing power because property prices
were increasing at a higher rate.

He did not specify the pace of increase in property prices but
analyst Panangian Simanungkalit said last weekend that house
prices generally increased by between 15 percent and 25 percent
and land prices by between 20 percent and 40 percent every year.

Paulus also said that demand for upper-class houses built in
designated complexes, which were generally in suburban areas, was
also weak because families with high incomes generally preferred
to stay in town centers.

He said Bank Niaga provided only 10 percent of its total loans
of Rp 5.66 trillion (US$2.3 billion) to the property sector,
particularly for the purchase of houses and office buildings.

Bank Niaga's reluctance to provide large loans to the property
sector was consistent with Panangian's recent warning that bad
loans to the sector might increase further in the coming years.

Panangian projected that nonperforming loans to the property
sector, which increased from Rp 3.9 trillion in 1995 to Rp 5.25
trillion in 1996, might rise to Rp 5.6 trillion this year.

Bank Niaga's head for corporate affairs, Jonki Kresnadi, said
that the bank had been very careful and selective in providing
loans for the property sector and that its bad loans for the
sector were less than 1 percent of its total bad loans of Rp
87.638 billion.

"Half of the bad loans are actually given to borrowers
operating in the textile industry," Jonki said.

According to the bank's annual report, its assets increased by
17.6 percent to Rp 7.34 trillion as of the end of 1996 from Rp
6.24 trillion as of the end of 1995, while its profit rose by
53.19 percent to Rp 97.97 billion in 1996 from Rp 63.95 billion
in 1995.

Jongki commented that the higher increase in the profit than
the assets was caused by improvements in the efficiency of the
bank's operations. "The rate of increase in the operational costs
was much lower than that in revenues," he added.

Bank Niaga, which is listed on the Jakarta Stock Exchange, is
41.71 percent owned by PT Austindo Teguhjaya, 12.58 percent by
BIA Investment Ltd. and 45.71 percent by the investing public.
The bank's shares were quoted at Rp 7,000 on the bourse
Wednesday. (13)