Bank Niaga's net income hit by higher taxes

The Jakarta Post, Jakarta

Despite posting an unaudited record pretax profit of Rp 228.6 billion (US$23.89 million) in the first quarter of 2005, Bank Niaga's net income decreased by 6.2 percent from the same period last year due to a higher tax rate.

The bank's first quarter net profit of Rp 165.4 billion was lower than the Rp 176.5 billion booked in the same period last year due to a higher effective tax rate of 28 percent in 2005 compared to 19 percent in 2004, the company said in a statement released over the weekend.

Earlier in the year the company warned that its net profit, which reached Rp 660 billion in 2004, would not grow at last year's rate of 66 percent due to higher tax liabilities in 2005.

As one of the banks recapitalized by the government following the 1997 financial crisis, Bank Niaga received a special five- year tax treatment, which expired in 2004, that allowed it to carry over tax losses.

Bank Niaga's record pretax profit was a 5 percent increase from the Rp 218.1 billion reported during the same period last year. However, it was lower than the targeted pretax profit growth of 20 percent announced by the company earlier.

The bank's lending grew by 59 percent from Rp 14.16 trillion in the first quarter of last year to Rp 22.51 trillion in the same period this year, boosting the bank's loan to deposit ratio from 72.9 percent to 91 percent for the same period this year.

Bank Niaga, which recently postponed a planned $100 million subordinated bond issue due to unfavorable market conditions, is controlled by the Malaysia-based Commerce Asset-Holding Berhad (CAHB).

CAHB, which has controlled the bank since late 2002, increased its ownership of the bank from 52.59 percent in March to 61.1 percent in April. The remaining shares of Bank Niaga are publicly held.