BNI profit jumps to 1.54t
The Jakarta Post, Jakarta
After being hit by a high-profile loan scandal that trimmed its net profit last year, state-owned Bank Negara Indonesia (BNI) recorded a threefold increase in first half net profit as against the same period last year.
The unexpected rise in profit may help the government's plan to sell a 30 percent stake in the country's third largest bank in terms of assets at the end of this year, in a bid to raise funds to cover a budget deficit estimated at Rp 24 trillion rupiah.
The government has a 99.12 percent stake in BNI, with the remaining shares held by the public.
In a statement on Friday, the publicly listed bank said profit in the first six months ending June jumped to Rp 1.54 trillion (US$171 million) from Rp 408 billion in the corresponding period last year.
BNI president director Sigit Pramono attributed the surge primarily to lower cost of funds after the central bank benchmark interest rates fell to a six-year low, reducing the burden the bank had to pay for its depositors.
"The bank is reaping a profit from the significant gap between its lending rates and the interest it pays on deposits," said Sigit in a telephone interview.
Many banks in the country have benefited from the aggressive decline in the central bank's benchmark interest rate, which allows banks to reduce their interest for deposits and at the same time increase their loans to consumers at more affordable rates.
The bank's cost of funds declined to Rp 2.54 trillion in the first half of this year from Rp 4.55 trillion a year earlier, causing net interest to increase to Rp 3.33 trillion from Rp 2.21 trillion. Net interest income is revenue from borrowers minus interest paid to depositors.
The bank's income from interest fell to Rp 5.88 trillion in the first half from Rp 6.75 trillion a year earlier due to the low demand for loans from the real sector following political uncertainty during the general election.
In the first six months of this year, BNI only managed to channel Rp 8.3 trillion in loans, or 52 percent of its total lending target for this year of Rp 16 trillion.
"The low loan expansion is not because we are reluctant or not working hard enough. It is because there is no demand for it," said Sigit.
BNI's outstanding loans rose to Rp 50.3 trillion as of June, from Rp 42 trillion in the same period last year.
The bank revised downwards its first-half profit last year after setting aside a provision to cover potential losses from a loan scandal in mid-2003. The bank had set aside Rp 1.3 trillion for the provision.
The BNI loan scandal centered on the channeling of export credits without proper appraisals by the bank's branch to a number of local companies to finance the export of commodities.
It later turned out that the exports never materialized, causing BNI to lose Rp 1.7 trillion.
BNI shares were unchanged at Rp 1,075 on the Jakarta Stock Exchange on Friday.