BNI profit jumps to 1.54t

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.