BNI increases loan loss provision

BNI increases loan loss provision

JAKARTA (JP): Bank Negara Indonesia's loan loss provision rose
by 77.16 percent as of September this year to Rp 755.58 billion
(about US$222.22 million) from Rp 424.49 billion in the same
month last year.

BNI president Widigdo Sukarman said yesterday that the rise in
the loan loss provision was necessary to reduce risk from
nonperforming loans.

He estimated that nonperforming loans in the country's banking
industry would surge in the coming years as many corporate
borrowers would face difficulty in paying their debts.

The currency crisis and the government's tight monetary
policy, which has caused a sharp increase in bank rates, would
certainly result in higher loan default rates, he said.

"We need to add the loan loss reserves as part of the bank's
prudential measures," he said.

Unlike other banks, publicly listed BNI was not severely
affected by the monetary turmoil, which had caused a 35 percent
decline in the rupiah against the U.S. dollar.

"BNI can survive the situation and even record an increase in
net profit and operating income in the third quarter," he said.

He said that BNI managed to book an 18.83 percent increase in
net profit to Rp 283.77 billion in the January to September
period this year from Rp 238.79 in the corresponding period last
year.

Widigdo attributed the small increase in net profit due to the
rise of the bank's loan loss provision.

The bank's total operating income rose to Rp 583.78 billion in
the first to third quarters of this year from Rp 354.11 billion
in the same period last year, he said.

BNI, the only state-owned bank listed in local stock
exchanges, booked a net interest income of Rp 903.21 billion in
the first nine months of this year, up 32 percent from Rp 684.18
billion during the corresponding period last year.

Widigdo said that the bank's total assets rose by 34.7 percent
to Rp 44.42 trillion as of September, compared to Rp 32.98
trillion in the same month last year.

He said that in the same period, BNI's total credits rose to
Rp 30.14 trillion from Rp 20.90 trillion while public funds
increased to Rp 21.19 trillion from Rp 18.11 trillion.

Widigdo declined to mention the bank's net profit target and
revenue this year.

"I cannot tell you about our target this year," he said.

A global securities firm ING Barings Securities recently
lowered its profit target for BNI for 1997 and 1998 in the wake
of the currency crisis.

Revision

Barings said that BNI's profit estimate for 1997 was revised
down to Rp 384 billion from Rp 469 billion while for 1998 it was
lowered to Rp 423 billion from Rp 548 billion.

Barings attributed its revision to shrinking margins this year
and slower than anticipated loan growth.

The securities firm said that the recent currency turmoil and
the real possibility of much lower loan growth and higher
prevailing interest rates for the rest of this year and most of
1998 would certainly affect the bank's financial performance.

Barings said it did not include the foreign exchange loss
incurred by BNI during the recent currency turmoil because BNI
helped the central bank to intervene in the foreign exchange
markets recently to prevent a further attack on the rupiah by
speculators.

"This can result in significant foreign exchange loss in the
bank," Barings said.

Widigdo, however, declined to comment on the bank's
intervention in the foreign exchange market and total amount of
funds for the intervention.

"Do not ask me about that. Ask the central bank for that," he
said.

BNI's director IG Antika said: "Even if we intervened, we are
just lending a hand to the central bank and the amount of the
intervention has been very limited." (aly)