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.