BCA net profit up 47.29% in first-half

Rendi A. Witular, Jakarta

Publicly listed Bank Central Asia (BCA), the nation's second largest bank in terms of assets, announced on Wednesday a 47.29 percent increase in first-half net profit as compared to the same period last year, mostly on the reduced cost of funds.

BCA president director Djohan Emir Setijoso said the bank posted a net profit of Rp 1.50 trillion (US$159.9 million) in the period ending June, as against Rp 1.01 trillion in the corresponding period the year before.

"The profit increase is attributed primarily to the lower cost of funds," said Setijoso at a news conference on Wednesday.

BCA gross interest income fell by 15 percent to Rp 5.61 trillion from Rp 6.49 trillion as revenue from government recapitalization bonds dropped due to lower interest rates.

The decline in the Bank Indonesia benchmark rate impacted BCA heavily because most of its recap bonds, which totaled Rp 42.63 trillion as of June, carry a variable interest rate that is linked to the BI rate.

At the same time, the bank also enjoyed profit from declining interest rates that reduced expenses in paying depositors. BCA's total interest expenses dropped to Rp 2.41 trillion in the first half from Rp 3.89 trillion in the same period of last year.

The gap between its lending rates and the interest it pays on deposits increased the bank's net interest income to Rp 3.19 trillion from Rp 2.60 trillion.

BCA said that outstanding loans grew by 50.32 percent, or Rp 11.2 trillion, to Rp 33.47 trillion, with loans to the corporate sector making up 43.43 percent of the bank's total lending portfolio, while the remaining 43.51 percent went to the commercial sector and 13.06 percent to the consumer sector.

The bank has targeted lending to grow by between Rp 8 trillion and Rp 10 trillion this year.

During the briefing, BCA finance director Jahja Setiaatmadja said that BCA would suffer potential losses of around Rp 120 billion per year, or Rp 12 billion per month, as a consequence of the central bank's decision to raise the minimum reserves requirement to 5 percent from 3 percent.

"There will be a potential loss due to the policy because we will only receive 3 percent interest on the money used as reserves, lower than the 7.5 percent interest received from government bonds," he said.