ING Barings revises down profit estimate for BNI

JAKARTA (JP): ING Barings Securities has lowered its profit estimate for publicly listed Bank Negara Indonesia for 1997 and 1998 as the rupiah upheaval continues.

The global securities company said in its latest research report that BNI's profit estimate for 1997 was revised down to Rp 384 billion (US$134.73 million) from Rp 469 billion while that for 1998 was lowered to Rp 423 billion from Rp 548 billion.

ING Barings said the revision was based on shrinking margins this year and slower than anticipated loan growth.

The recent currency turmoil and the real possibility of much lower loans growth and higher prevailing interest rates for the rest of this year and most of 1998 would certainly affect the bank's financial performance, it said.

ING Barings said the likelihood of the bank to hit its full year target had already diminished.

However, interim results of the bank's net profit in the second quarter were in line with the expectations to Rp 230 billion, slightly under 50 percent of the full year target of Rp 469 billion, it said.

BNI's second quarter interim profits implied there was no change from the first quarter net profit result of Rp 115.5 billion.

The securities firm said the bank's loan to deposit ratio (LDR) rose slightly to 95.9 percent from 93.9 percent at the beginning of the year, still lower than the average 106 percent.

ING Barings said Indonesia's banking industry climate was changing, especially with the interest rate and loan growth over the past few months.

Barings said that instead of a further easing in interest rates and steady loan growth, interest rates have hiked and were unlikely to return to their previous level before July at any stage in the near future.

ING Barings was confident lending rates would stabilize at about 24 percent to 25 percent -- an increase of four percent to five percent above the previous level -- and deposit rates may increase further in coming months.

"This, as a result, will put pressure on interest margins," the report said.

The securities firm said its estimate for BNI, the largest bank in the country, did not include the foreign exchange loss incurred by the bank during the recent currency turmoil.

BNI, Barings said, helped the central bank intervene in the foreign exchange markets recently to prevent a further attack on the rupiah by speculators.

"This can result in significant foreign exchange loss in the bank," ING Barings said.

The securities firm said yesterday the revision for bank BNI, which booked a total net profit of Rp 335 billion in 1996, was made to reflect the current less favorable climate for the banking system in Indonesia.

BNI executives were not available for comment.(aly)