BNI expects nonperforming loans to expand
JAKARTA (JP): Publicly listed Bank Negara Indonesia (BNI) plans to boost its loan loss reserves to offset a sharp rise in nonperforming loans due to the economic crisis, a top official has said.
"More earnings need to be retained to increase the loan loss reserves because we anticipate nonperforming loans to rise in 1998," BNI president Widigdo Sukarman told reporters yesterday following the bank's annual shareholders meeting.
He declined, however, to disclose the increase, but said that the economic crisis would force all banks to face the same problem because the real sector had been badly hit by difficulties in obtaining imported raw materials and suffered from high interest rates.
BNI reported its outstanding loans totaled Rp 60.28 trillion (US$4.67 billion) as of March, a jump of more than 155 percent against the level of the same period last year.
Widigdo said the sharp rise was due to the plunging value of the rupiah against the U.S. dollar which caused its foreign exchange lendings to soar in local currency terms.
He also said the shareholders had agreed to the bank's proposal to provide an annual dividend of only 20 percent of net earnings to increase the loan loss reserves.
The dividend for 1997 was fixed at Rp 14 per share.
BNI reported 1997 net earnings declined 5.49 percent to Rp 315.24 billion from Rp 335.13 billion in 1996.
The bank attributed the weaker performance to the country's economic crisis and the 336.93 percent increase in loan loss provisions to Rp 689.72 billion during the year from Rp 157.85 billion in 1996.
The bank's net profit in the first quarter of 1998 totaled Rp 36 billion, Widigdo said, but he did not provide comparative figures.
Total deposits during the first quarter jumped more than 111 percent to Rp 42.41 trillion against the same period in 1997, or a 44.73 percent increase compared to the deposit position as of the end of December.
The bank attributed the sharp increase to high time-deposit interest rates.
BNI also reported that total assets in the first quarter of this year soared more than 126 percent to Rp 81.24 trillion from the same period in 1997, or a 42 percent increase from the full year's level.
Domestic banks have aggressively pushed up interest rates to retain depositors' money due to rising uncertainty in the industry following the closing down of 16 banks in November.
Widigdo, however, stressed that interest rates must gradually come down but that it would not significantly lessen the effectiveness of the government's macroeconomic policy.
BNI and other banks have started to lower their interest rates. Interest rates for one-month time deposits have dropped from 60 percent last month to 55 percent last week, while settling at 48 percent yesterday.
Widigdo said the government's high interest rate policy aiming to contain inflation and stabilize the rupiah was no longer effective.
Shareholders also agreed yesterday to the management's proposal to revalue the bank's fixed assets that have been owned for more than five years in an effort to raise its capital adequacy ratio from a current level of 8.31 percent.
Shareholders also approved a plan to raise the bank's authorized capital to Rp 8.5 trillion from Rp 5 trillion. (rei)