Rendi A. Witular, The Jakarta Post/Jakarta
State-owned Bank Mandiri, the nation's largest bank in terms of assets, estimates that lending may grow by at least 20 percent next year on the back of rising business confidence and improving security and political conditions.
Mandiri president director E.C.W. Neloe said the lending growth next year might exceed the bank's forecast, following the government's requests to the banking sector to help channel loans to finance massive infrastructure projects at home.
"Mandiri has targeted lending to grow by at least 20 percent next year. The lending may increase further if the government is serious in speeding up the construction of infrastructure to support the business community," said Neloe after a public briefing to investors and media on Friday.
The bank's 20 percent lending growth may equal some Rp 18 trillion (about US$2 billion), since the bank has previously said its lending this year might grow by at about 20 percent.
In the first nine months ending September this year, the bank has channeled some Rp 12 trillion in loans. The bank's consolidated lending as of September stands at Rp 87.03 trillion compared to Rp 75.9 trillion in December last year.
Vice president Jusuf Kalla has previously said the government would form a consortium, consisting of state-owned banks, to help channel loans to finance the construction of 1,500-kilometer toll roads that would link Merak in Banten with Banyuwangi in East Java.
The government is expected to construct some 300 kilometers of toll roads per year, with an annual investment as high as Rp 30 trillion.
"Mandiri is ready to help meet the government's request in assisting with funding for the project. However, there should be a comprehensive study over the feasibility of the projects offered to local banks," said Neloe.
Elsewhere, regarding the bank's non-performing loans with several ailing companies, Mandiri corporate banking director Soleh Tasripan said there has been progress in efforts to recover the loans.
Soleh said the bank would sign a restructuring agreement with troubled pulp and paper producer PT Kiani Kertas this month, as the firm's new investor, Singapore-registered Novela International, had injected $50 million in working capital into the firm to improve its business operation.
The capital is needed to help revive Kiani's business so that it can pay its debts to Mandiri, amounting to about $201 million.
Tasripan said the restructuring agreement would also include an extension to seven years for Kiani to settle its debts to Mandiri.
"Normally restructuring takes about five years. But we have proposed to the central bank for a possible extension to up to seven years," said Soleh.
Due primarily to Kiani's bad loans, Mandiri's gross non- performing loans (NPL) ratio remains high at 7.2 percent as of September this year, compared to the central bank's 5 percent limit.
Soleh also said that the bank was expecting to recoup some of its money this year from ailing retailer Pasaraya as the company managed to sell its building in Manggarai, Central Jakarta, for about Rp 160 billion.