Bank Servitia sees more bad debts this year

JAKARTA (JP): Publicly listed Bank Servitia has raised its loan loss provision this year by about 30 percent to anticipate an increase in nonperforming loans.

Bank Servitia's marketing director Tarunodjojo Nusa said that bank's loan loss reserves rose by 30 percent to Rp 14.5 billion (US$4.02 million) as of September this year, from Rp 11 billion in the same period last year.

He estimated that nonperforming loans would increase this year as many corporate borrowers, hit by the currency turmoil and high interest rates, would face difficulties paying their due debts.

"Since the impact of the currency turmoil will also be felt next year, we have to increase the loan loss provision to Rp 20 billion in 1998 and between Rp 24.5 billion and Rp 25 billion in 1999," he told journalists after signing a cooperation agreement with the United Nations Childrens' Fund (Unicef).

He said that the currency crisis, which has caused the rupiah to decline 40 percent against the American dollar since July, would certainly result in an increase in nonperforming loans.

"That is the reason why we increase our loan loss provision from year to year," he said.

He said that the bank allocated total credits of Rp 1.48 trillion as of September this year compared to Rp 896.65 billion in the same period last year.

He said the bank had also raised Rp 1.40 trillion in public funds as of September this year compared to Rp 862.80 billion in the corresponding period last year.

Tarunodjojo said the bank expected to record a Rp 22 billion net profit this year, in line with the previous projection.

He said that Bank Servitia, which had total assets of Rp 1.7 trillion as of September and expects this to increase to Rp 2 trillion next year, plan to issue rights shares next year to raise about Rp 150 billion from the public.

"Proceeds from rights share issuance is expected to increase the bank's paid up capital to Rp 250 billion," he said. (aly)