BRI slashes bad loans worth over Rp 1 trillion
BRI slashes bad loans worth over Rp 1 trillion
JAKARTA (JP): The state-owned Bank Rakyat Indonesia (BRI) has written off more than Rp 1 trillion (US$435 million) in bad loans from its balance sheet, according to the bank's top official.
BRI president Djokosantoso said yesterday that the writeoff of the bad loans was an important measure in improving the bank's financial performance.
"The move is also part of the bank's preparations to go public, possibly in 1998," he told newsmen at a ceremony for the signing of a cooperation agreement between the bank and the Islamic University of Indonesia.
He said that the removal of the bad credits reduced the total number of the bank's bad (totally unpaid) loans to 3 percent of its total outstanding loans, from 6 percent previously.
Djoko said that problem loans at the bank amount to 12.7 percent of its total current outstanding loans of Rp 22 trillion.
BRI's announcement about the write-off of its bad loans was the first made by a state-owned bank. State banks have been suffering a flat growth in their lending for the last three years owing to the impact of the high value of their bad loans.
According to Bank Indonesia, non-performing loans dropped to 10.4 percent in December, last year, from 12.1 percent in the same month of 1994. The portion of the bad (totally unpaid) debts also dropped to 3.3 percent from 4 percent in the same period.
Writing off loans is an accounting process whereby a loan determined to be a worthless asset is removed from the books as an earning asset and charged to the loan loss reserve.
He said that BRI would continue to seek the repayment of the loans despite their removal from the balance sheet.
In 1995, BRI booked a 74 percent increase in its consolidated pre-tax profits to Rp 255.25 billion (US$111 million) from Rp 147.17 billion in the previous year.
The bank's revenues from interest fees increased by 25 percent to Rp 1.55 trillion last year from Rp 1.35 trillion the previous year.
The bank's consolidated assets, which totaled Rp 25.9 trillion as of 1994, rose by 10 percent to Rp 28.56 trillion last December.(hen)