Rendi A. Witular, The Jakarta Post/Jakarta

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.