BTN to cut lending rate to 13.5%

BTN to cut lending rate to 13.5%

The Jakarta Post, Jakarta

State Bank Tabungan Negara (BTN), which specializes in house
loans, plans to lower its interest rate on lending starting next
month, the bank's president said.

BTN president Kodradi said on Monday the lending rate would be
cut to about 13.5 percent to 14.5 percent from the current rate
of 15 percent to 16 percent.

Speaking following a closed-door meeting with the banking
subcommission of House of Representatives Commission IX on
financial affairs, Kodradi said BTN could not afford a larger
rate cut due to its debt burden and the threat of nonperforming
loans (NPLs).

There had been hopes that BTN would make a more aggressive cut
to its lending rate, particularly because the central bank has
significantly cut its benchmark rate to about 7 percent from more
than 13 percent last year.

But Kodradi said BTN would have to allocate a huge amount of
money to cover the interest rate burden of its recent Rp 1
trillion bond issuance.

He said the bank's gross nonperforming loans stood at about
4.9 percent as of May, higher than the gross level of 3.8 percent
in 2003.

"But if the NPLs increase again, the bank may have to raise
its lending rate," Kodradi said.

However, he said that despite the reduction in the lending
rate, the bank could still enjoy a profit this year.

"What is more important is that our bank can resume its
intermediary role," he said.

The central bank has encouraged banks to increase lending to
the corporate sector to help boost economic activity at home.
But most banks remain reluctant to boost lending to the corporate
sector due to lingering risks.

Kodradi said BTN was able to surpass the 2003 lending volume
target of Rp 2.1 trillion, booking Rp 3.3 trillion in lending for
the year.