High NPL drags down Mandiri's H1 profit
The Jakarta Post, Jakarta
Indonesia's largest bank by assets, PT Bank Mandiri Tbk, reported a sharp decline in net profit on Wednesday resulting from an increase in non-performing loans (NPL) during the first half of the year.
According to its audited first semester report, the bank's net profit dropped by 80 percent to Rp 620 billion (US$60.49 million) from over Rp 3 trillion in the corresponding period last year.
"The decrease was caused by increasing provision for NPLs in compliance with Bank Indonesia (BI)'s regulation on asset quality rating for commercial banks," Mandiri managing director for corporate secretary, human resources and compliance, Nimrod Sitorus, told the media.
The report said that as of June 30, the bank's provision for NPLs as required by BI stood at Rp 138.4 billion.
The bank's gross NPLs rose to 24.6 percent (Rp 25.5 trillion) as of June 2005 from 8.2 percent (Rp 6.7 trillion) as of June 2004, while its net NPLs rose to 15.4 percent from 1.8 percent.
Nimrod said that 30 borrowers, consisting of corporate and individual borrowers, accounted for 75 percent of the total NPLs.
Mandiri managing director for treasury and international affairs Johannes Bambang Kendarto said the bank had mapped out 10 steps to lower the percentage of NPLs, including the establishment of a separate unit to manage bad loans and a special team to monitor loans.
Separately, the bank's president director, Agus Martowardojo, said during a hearing with the House of Representatives' Commission XI on finance, as quoted by detik.com, that his bank hoped to lower its NPL rate to 5 percent next year.
The bank's loans to deposit ratio improved to 56.8 percent in the year's first half from 47.9 percent in the same period last year, in line with an increase in its total loans to Rp 104 trillion from Rp 82.2 trillion, while third party deposits increase to Rp 183 trillion from Rp 171.6 trillion previously.
The bank's capital adequacy ratio (CAR) stood at 23.3 percent, far higher than the minimum 8 percent required by BI.
Nimrod said that despite the precipitous drop in profits, the bank would still expand its business by setting up 80 more branches across the country before the end of the year.
"Of the 120 branches we are targeting this year, 40 of them have already been established," he said.
Earlier, the bank's management said that it would allocate US$30 million this year to expand and upgrade its information technology, including the installing of 120 new automatic teller machines.
After the bank's report was published on Tuesday, Dow Jones reported that its share price fell by 2.8 percent to Rp 1,380 per share, saying that investors feared that its first half poor performance could indicate a fall in its full-year earnings. (006)