Mandiri net profit up 33%

Mandiri net profit up 33%

Dow Jones, Jakarta

Indonesian state-owned PT Bank Mandiri posted a Rp 2.79 trillion (US$311 million) net profit for the first nine months, up 33 percent on year, the bank said Tuesday.

However, Mandiri's net interest income fell 6.1 percent to Rp 5.19 trillion in the period, the country's largest bank said in a statement. The bank's interest income failed to rise as quickly as interest expenses did during the period, Mandiri said without explaining.

Net income rose due to gains related to the bank's government bond holdings, which account for about two thirds of its assets, Mandiri said. As government interest rates have fallen this year, the value of Mandiri's government bonds have risen.

Mandiri's non-performing loans fell to 9 percent of total loans from 12.5 percent a year earlier, the bank said, also helping to boost profits.

"The improvement in profit was principally due to lower bad debt expenses and market-to-market gains on government bonds arising from declining interest rates," the statement said.

Gains on securities booked the bank Rp 2.09 trillion in the nine-month period, pushing operating income up 19.7 percent to Rp 8.15 trillion.

Like many banks in Indonesia, Mandiri relies mainly on interest payments on bonds the government has injected into the bank since the 1997-98 Asian crisis. Total assets stood at Rp 251.6 trillion at the end of the nine-month period, of which about Rp 150 trillion were recapitalization bonds, the bank said.

Banks are trying to increase the number of loans to improve their earnings margins, which could be boosted by lending more to corporate customers rather than holding government bonds. Bank Mandiri said its outstanding loans grew 34.1 percent to Rp 57 trillion at the end of the nine months, but were still much lower than its government bond assets.

Mandiri's capital adequacy ratio stood at 29.6 percent at the end of the period.

The government hopes to sell a 30 percent stake in the unlisted Bank Mandiri through an initial public offering next year.

Bank Mandiri was formed in July 1999 by the merger of four state-owned banks: PT Bank Dagang Negara, PT Bank Ekspor Impor Indonesia, PT Bank Pembangunan Indonesia, and PT Bank Bumi Daya.