BII profit increases on robust borrowings

BII profit increases on robust borrowings

Bloomberg, Jakarta

PT Bank Internasional Indonesia (BII), a lender partly owned by South Korea's largest bank, said 2004 net income more than doubled as the lowest interest rates in six years spurred borrowing by consumers and companies.

Net income rose to Rp 821.6 billion (US$88 million), or Rp 17.19 a share, from Rp 309.1 billion, or Rp 6.47 a share, in 2003, BII said in a statement. Net interest income, or interest earned on loans after deducting interest paid on deposits, rose to Rp 1.65 trillion from Rp 1.02 trillion.

"The bank has a good management team and strong market penetration to middle-class consumers and small and medium enterprises," said Liny Halim, an analyst at Macquarie Securities Indonesia in Jakarta who has an "outperform" rating on BII.

Indonesia's banks are benefiting from an economy forecast by the government to expand 5.5 percent this year, the fastest in nine years, after growing 5.1 percent in 2004. Consumer spending, which makes up about 67 percent of the $208 billion economy, and corporate investment both increased as borrowing costs fell.

President Director "Henry Ho is doing a great job there," and "all the right executives are in place," Kelvin Long, a sales director at Samuel Asset Management, said before the earnings announcement. He rates BII stock a "buy".

Shares of BII, which rose 68 percent last year, outpacing a 45 percent gain in the benchmark Jakarta Composite Index, were unchanged at Rp 205 in midday on the Jakarta Stock Exchange.

"They are also slowly getting back to the corporate lending side," and plan to "build on the consumer side" through the planned acquisition of a motorcycle-financing lender, Long said.

Deposit rates have fallen faster than lending rates, improving banks' interest margins. The net interest margin, or the difference between what a bank charges for loans and pays for funds, widened to 5.20 percentage points last year from 3.10 percentage points in 2003, the bank said.

The average six-month deposit rate was 6.2 percent last year, compared with an average lending rate of 15.6 percent.

Kookmin Bank, South Korea's largest lender, and Temasek Holdings Pte., the Singapore government's investment company, control BII after buying 51 percent of the bank from the government in October 2003.

The government sold a further 15.25 percent stake in the lender to investors in January to help cover its budget deficit.

BII had outstanding loans of Rp 14.15 trillion as of Dec 31. 2004, compared with Rp 10.1 trillion in 2003, the bank said in the statement.