BRI first half profit may rise by 36% on lower cost

Rendi A. Witular, Jakarta

Publicly listed Bank Rakyat Indonesia (BRI), the nation's fourth largest bank in terms of assets, said that net profit in the first half of this year is estimated to rise by more than 36 percent from the same period of last year, due mostly to the lower cost of funds.

BRI president director Rudjito said the bank was expecting to book profit of between Rp 1.5 trillion (US$166 million) and Rp 2 trillion in the first six months of this year, up from Rp 1.17 trillion in the same semester of last year.

"Our profit is estimated to rise higher this first half to at least Rp 1.5 trillion, benefiting from lower interest rates that reduce costs for paying interest to our depositors," said Rudjito during an exhibition on Thursday.

Rudjito explained that most local banks this year had been enjoying higher profits amid the declining trend in Bank Indonesia's benchmark interest rate, which helped pushed down interest rates for savings and deposits, thus reducing the cost of funds.

"The low cost of funds plays a greater role in the rising profits of most banks compared to lending activities. Lending remained flat because of uncertainty in the business sector during the general election, denting demands for loans," he said.

BRI shares ended lower by Rp 25 to Rp 1,725 on the Jakarta Stock Exchange on Thursday on profit taking.

Elsewhere, Rudjito said that the bank was still undergoing a feasibility study before joining the tender process for a controlling stake in its smaller rival Bank Permata, the country's seventh largest bank in terms of assets.

"We are still studying whether we can form a synergy of operations with Permata, since the bank focuses its business more on the consumer and commercial sector," he said, adding that BRI still had time until Aug. 13 to officially file the bid.

BRI is known as the world's largest micro bank with 3,931 branches across the archipelago, mostly located in remote areas.

The bank plans to join the Permata bid by forming a financial consortium comprising local investors. However, the bank will not lead the consortium due to the central bank regulation that limits a bank to invest no more than 10 percent of its equity in a single entity.

"Although we will become a minority investor in the consortium, that doesn't mean our role will be minor. The investment is still strategic for our future growth," said Rudjito.