BCA's profit drops due to falling interest earnings
<p>BCA's profit drops due to falling interest earnings</p><p>Dadan Wijaksana, The Jakarta Post, Jakarta</p><p> Bank Central Asia (BCA), the country's largest private bank,
announced a 43 percent drop in first-quarter net profit, in what
analysts said was further evidence of the sector's continued
gloomy outlook.</p><p>The publicly listed bank's first three-month net profit stood
at Rp 476.0 billion (about US$51.4 million), as compared to Rp
832.69 billion posted in the same period last year, as reported
in a press statement issued on Tuesday.</p><p>The profit slump was largely attributed to a 6.2 percent drop
in the bank's interest income to Rp 3.35 trillion as the
declining central bank benchmark interest rate has lowered income
from government recapitalization bonds.</p><p>Currently, the bank holds Rp 45.7 trillion worth of
recapitalized bonds, making up a significant part of around Rp
116 trillion of its total assets. It has also some Rp 28 trillion
in central bank bills.</p><p>Thanks to a more stable rupiah and manageable inflation, the
central bank's interest rate is now hovering at around 11.2
percent, as against more than 16 percent last year in the same
period.</p><p>Banking analyst Aviliani of the Institute for Development of
Economics and Finance (Indef) said that BCA's case reflected the
current overall weak state of the country's banking sector, which
relied too much on interest earnings from recapitalized bonds
instead of earning from core lending activities.</p><p>"That only reflects the real condition of our banking sector,
some 60 percent of their earnings come from the interest payment
of the government's recap bonds," Aviliani told The Jakarta Post,
adding that because of that, banks were reluctant to extend a
considerable amount of lending to the private sector.</p><p>During the first three months of the year, BCA extended some
Rp 600 billion in new loans, bringing its outstanding loans to
around Rp 22 trillion.</p><p>"There is no other choice for BCA but to increase its loans
exposure if it wants to obtain more revenue to help cover the
declining earning from the recap bonds," Aviliani said.</p><p>She added, however, that it would not be easy because credit
demand from the indebted corporate sector remains low.</p><p>Economist Faisal Basri has said that credit from the banking
sector grew slowly over the last couple of years, which saw in
2001 and 2002, new credit growth of 11.9 percent and 14.4
percent, respectively.</p><p>"By comparison, the average growth of new credit before the
crisis stood at around 26 percent," Faisal said.</p><p>Elsewhere, also contributing to BCA's profit fall was the
higher operating costs, which had risen by 28 percent to Rp
875.87 billion from Rp 682.30 billion last year.</p><p>The bank's capital adequacy ratio (CAR) stood at 38.81 percent
on March 31, lower than 40.30 percent posted in the same period
last year. As for the non-performing loans (NPLs), they accounted
for some 3.43 percent of total loans at the end of this quarter,
a slight increase from 3.24 percent last year.</p><p>Bank Indonesia requires a minimum of 8 percent for CAR and 5
percent for NPLs.</p><p>BCA is 52 percent owned by Farallon Capital Management. The
government holds 8.5 percent with the public owning the
remainder.</p><p>On Tuesday, the bank's shares rose by Rp 100 to Rp 2,450
compared to the earlier day's closing amid a sharp increase in
the Jakarta Stock Exchange index. Analysts said that investors
had anticipated the rise in share value.</p>
announced a 43 percent drop in first-quarter net profit, in what
analysts said was further evidence of the sector's continued
gloomy outlook.</p><p>The publicly listed bank's first three-month net profit stood
at Rp 476.0 billion (about US$51.4 million), as compared to Rp
832.69 billion posted in the same period last year, as reported
in a press statement issued on Tuesday.</p><p>The profit slump was largely attributed to a 6.2 percent drop
in the bank's interest income to Rp 3.35 trillion as the
declining central bank benchmark interest rate has lowered income
from government recapitalization bonds.</p><p>Currently, the bank holds Rp 45.7 trillion worth of
recapitalized bonds, making up a significant part of around Rp
116 trillion of its total assets. It has also some Rp 28 trillion
in central bank bills.</p><p>Thanks to a more stable rupiah and manageable inflation, the
central bank's interest rate is now hovering at around 11.2
percent, as against more than 16 percent last year in the same
period.</p><p>Banking analyst Aviliani of the Institute for Development of
Economics and Finance (Indef) said that BCA's case reflected the
current overall weak state of the country's banking sector, which
relied too much on interest earnings from recapitalized bonds
instead of earning from core lending activities.</p><p>"That only reflects the real condition of our banking sector,
some 60 percent of their earnings come from the interest payment
of the government's recap bonds," Aviliani told The Jakarta Post,
adding that because of that, banks were reluctant to extend a
considerable amount of lending to the private sector.</p><p>During the first three months of the year, BCA extended some
Rp 600 billion in new loans, bringing its outstanding loans to
around Rp 22 trillion.</p><p>"There is no other choice for BCA but to increase its loans
exposure if it wants to obtain more revenue to help cover the
declining earning from the recap bonds," Aviliani said.</p><p>She added, however, that it would not be easy because credit
demand from the indebted corporate sector remains low.</p><p>Economist Faisal Basri has said that credit from the banking
sector grew slowly over the last couple of years, which saw in
2001 and 2002, new credit growth of 11.9 percent and 14.4
percent, respectively.</p><p>"By comparison, the average growth of new credit before the
crisis stood at around 26 percent," Faisal said.</p><p>Elsewhere, also contributing to BCA's profit fall was the
higher operating costs, which had risen by 28 percent to Rp
875.87 billion from Rp 682.30 billion last year.</p><p>The bank's capital adequacy ratio (CAR) stood at 38.81 percent
on March 31, lower than 40.30 percent posted in the same period
last year. As for the non-performing loans (NPLs), they accounted
for some 3.43 percent of total loans at the end of this quarter,
a slight increase from 3.24 percent last year.</p><p>Bank Indonesia requires a minimum of 8 percent for CAR and 5
percent for NPLs.</p><p>BCA is 52 percent owned by Farallon Capital Management. The
government holds 8.5 percent with the public owning the
remainder.</p><p>On Tuesday, the bank's shares rose by Rp 100 to Rp 2,450
compared to the earlier day's closing amid a sharp increase in
the Jakarta Stock Exchange index. Analysts said that investors
had anticipated the rise in share value.</p>