BNI posts lower Q1 net profit

BNI posts lower Q1 net profit

The Jakarta Post, Jakarta

State-owned Bank Negara Indonesia (BNI) said on Wednesday its
first quarter net profit plunged by 13 percent upon its decision
to raise bad loan provisions by more than fourfold.

The country's second largest bank in terms of assets said it
booked a profit of Rp 764 billion (US$88 million) in the first
quarter of this year, down from Rp 864 billion in the same period
last year.

BNI's net interest income rose to Rp 1.65 trillion from Rp
1.07 trillion due to an increase in gains from loan interests.

However, the higher income was set off by the bank's decision
to allocate Rp 607 billion to cover bad loans, up from Rp 102
billion in the first quarter of 2003.

"The decline in our profit was caused by the increase in loan-
loss provisions... We just want to be more prudent," said BNI
president Sigit Pramono.

The bank has been trying hard to be more careful in channeling
loans after a massive Rp 1.7 trillion lending fraud in mid-2003
that involved BNI officials. Its net profit shrunk after a Rp
2.45 trillion allocation to loan-loss provisions last year,
including Rp 1.3 trillion to cover losses from the fraud.

Sigit said in a bid to boost the bank's future performance,
the management had proposed a merger plan with smaller rival Bank
Permata to the government.

"We have proposed the plan ... now it's up to the government
whether to approve it or not," he said.

BNI has expected the merger to be realized in September or
before the government's divestment plan for BNI and Permata. The
government plans to sell 30 percent of its shares in BNI and 71
percent in Permata in the second half of this year.

Sigit explained that the merger proposal was made in response
to Bank Indonesia's request for local banks to increase their
paid-up capital as stipulated in the country's banking blueprint,
to aid their development as regional players.

He said if the merger plan was successful, the government
would be able to sell its shares in the merged bank at a higher
price.

BNI shares jumped by 12 percent to Rp 1,375 on the local
bourse over the issue.

Separately, in regards the repayment of debts owed by troubled
textile and engineering giant Texmaco Group, Sigit said after
facing uncertainties for more than three years, the bank had
finally obtained payment of $67 million from the dissolved
Indonesian Bank Restructuring Agency (IBRA).

BNI provided a loan to Texmaco in the form of letter of credit
(L/C) facilities in 2001 as part of a debt restructuring deal.

However, the company defaulted on its debt and IBRA, which
took over Texmaco's massive debt to BNI, agreed to guarantee the
trade facility.