Indovest Bank's bad investments cost it Rp 1b
Indovest Bank's bad investments cost it Rp 1b
JAKARTA (JP): Indovest Bank, a joint venture bank listed on the Jakarta and Surabaya stock exchanges, suffered a financial loss of Rp 1.08 billion (US$502,793) from its securities trading on the capital market last year.
Gatot Budiarto, a director of the bank, said the loss was incurred due to more than a 50 percent drop in the prices of shares bought during the capital market's boom in early 1990.
He refused to disclose the amount of shares sold but said that all the bank's equity investment in the capital market had been dumped in order to comply with the central bank's regulation, which restricts banks from being engaged in securities trading.
Indovest, which used to operate as a non-banking financial institution, started to operate as a commercial bank early last year to adjust to the new banking law.
BDN owns a 51-percent stake in Indovest, Mitsubishi Bank Ltd of Japan 18.14 percent, Nikko Securities Co. Ltd of Japan 17.43 percent and private investors another 13.43 percent.
However Gatot said that Indovest made a profit despite the loss from the sales of its stocks.
The bank's after-tax profit rose by almost 70 percent to Rp 7.46 billion last year from Rp 4.4 billion in 1992. Its total assets also significantly increased to Rp 366.34 billion from Rp 307 billion.
Margin
"The significant increase in the net income was possible due to the high margin of the bank's interests," he told newsman following the bank's annual shareholders' meeting.
Gatot said, however, that profit growth is likely to decline this year due the tighter competition. "The interest rates both for deposits and lending are more stable at present and it will therefore be difficult to maintain the high margin," he said.
He said Indovest still relies on its old clients despite the change in its status to a commercial bank and acknowledged that it has yet to become a "real bank".
Gatot said the bank does not have a branch and that its loan to deposit ratio (LDR) of 171 percent is still far higher than the maximum level of 110 percent required by the central bank.
Shareholders approved the bank's proposal to pay a cash dividend of Rp 75 per share during yesterday's annual meeting.(hen)