BRI pre-tax profit to surge by 98%
BRI pre-tax profit to surge by 98%
Rendi A. Witular, The Jakarta Post, Jakarta
State-owned Bank Rakyat Indonesia, the country's largest
microfinancing bank, said on Monday it was expecting to book a
pre-tax profit of Rp 2.9 trillion (US$341 million) at the end of
this year, up by around 98 percent from last year.
BRI's corporate secretary Rochidayat Taepur told The Jakarta
Post the increase would mostly be attributable to the surge in
loan interest, which was estimated to contribute around 75
percent to the bank's total interest revenue.
The remaining interest revenue would be from the government's
recapitalization bonds, he said.
Today, BRI is still holding around Rp 29 trillion in
recapitalization bonds.
"We expect revenue from loan interest, rather than from
recapitalization bonds, will boost our profit higher this year,"
said Rochidayat.
He said that the bank's operating income was estimated at more
than Rp 7.5 trillion this year.
Last year, the country's fourth largest bank, booked an
operating income of Rp 7.07 trillion and a pre-tax profit of Rp
1.46 trillion.
BRI has been regarded by many analysts as the strongest state-
owned lender, thanks to its focus on extending loans to small
businesspeople, mostly farmers. Of the bank's Rp 43.6 trillion in
outstanding loans, as of June this year, 91.62 percent were
channeled to micro-scale, small-scale and medium-scale
enterprises.
Such loans have proven to carry little risk of default
compared to loan exposure to large corporations. Small businesses
are regarded as being more conscientious in repaying debts than
large businesses.
As a result, BRI currently has the highest return on equity
(ROE) in the banking industry at 45.6 percent, almost twice the
return booked by other banks on average.
The government, which holds 100 percent of BRI's shares, is
currently in the process of selling part of its ownership in the
bank, via the initial public offering (IPO) scheme.
The government is expected to generate around Rp 4.17 trillion
in proceeds from the selling of 4.76 billion shares, or 40.5
percent of total shares, at Rp 875 per share.
The bank is in the process of offering its shares to retail
investors from Nov. 3 to Nov. 5. The shares will be listed on the
Jakarta Stock Exchange and Surabaya Stock Exchange on Nov. 10.
According to Rochidayat, the bank will allocate around 45.9
percent of its 4.76 billion shares to domestic investors, while
the remaining 54.1 will go to foreign investors.
The share offer has received a warm reception from domestic
investors, prompting speculations that the bank might increase
the portion of shares for locals.
However, Rochidayat explained that BRI decided to allocate a
larger portion to foreigners because the bank's management was
afraid that domestic investors would use the shares for
speculation at the local bourse, undermining the price of the
shares.
"From other IPO processes that we have observed, domestic
investors tend to buy shares for speculation and for short term
investment. Thus, we prefer foreign investors as they buy the
shares for long-term investment," said Rochidayat.
For the 45.9 percent shares offered to domestic investors, BRI
will allocate 5 percent to retail investors, 5 percent to the
bank's customers, 10 percent to the bank's employees and the
remaining 25.9 percent to institutional investors, he said.