BRI expects to beat 2005 profit forecast

BRI expects to beat 2005 profit forecast

Agencies, Jakarta

PT Bank Rakyat Indonesia (BRI), the nation's fourth-largest
lender, said it expects to beat its profit forecast of Rp 3.73
trillion (US$378 million) this year because of higher lending to
small and medium businesses.

Net income for the full year will probably increase about 3
percent from Rp 3.63 trillion last year, Wayan Alit Antara, chief
financial officer at the Jakarta-based lender, said on Tuesday as
reported by Bloomberg.

Profit next year may increase by as much as 10 percent, fueled
by loan demand from small and medium companies, Wayan Alit said.

Indonesia's $258 billion economy is forecast to expand by 5
percent to 5.7 percent in 2006, lower than the government's 6.2
percent growth projection, Bank Indonesia said on Dec. 15.
Indonesia's economy grew 5.1 percent last year.

The bank also expected its lending in 2006 to grow by up to 20
percent from expected total outstanding loans of Rp 79 trillion
at the end of 2005.

"The higher loan growth should provide support for net profit
growth of 10 percent in 2006," BRI President Sofyan Basir was
quoted by Dow Jones as saying.

Credit demand is still strong, even though the central bank
has increased its benchmark rate by 175 basis points to 12.75%
since Nov. 1, he said.

He said BRI's lending has increased 25 percent on year in the
nine months to Sept. 30, as a result of the bank's decision to
maintain its rate on loans for small and medium-sized enterprises
at around 18 percent, despite the recent benchmark rate hikes by
Bank Indonesia.

The expansion in lending helped fuel an 11 percent increase in
net interest income to Rp 9.3 trillion for the nine-month period,
from Rp 8.37 trillion a year earlier.

Wayan Alit said the bank is planning to sell up to Rp 6
trillion in government bonds next year to raise funds for the
expansion of lending.

Analysts said the government bond sale is also aimed at
reducing the bank's risk from the decrease in value of the
government bonds as a result of rising interest rates.

The bank's net profit during the nine months to Sept. 30 fell
8 percent on year to Rp 2.5 trillion, mostly as a result of the
decrease in the value of its government bonds.

In a recent research note, Macquarie Securities said BRI may
book Rp 800 billion in losses on its government bond holdings in
2005.

The bank's end-September government bond portfolio totaled Rp
17.19 trillion, down from Rp 25.15 trillion in the same period in
2004.

The government injected around Rp 600 trillion in bonds into
local banks following the 1997-1998 Asian financial crisis.