Mandiri posts 12.6% increase in profit

The Jakarta Post, Jakarta

The net profit of state-owned Bank Mandiri, the country's largest bank in terms of assets, surged by 12.6 percent during the first quarter of this year, despite a 27 percent decline in interest revenue.

The bank said in a statement on Friday that it had posted a net profit of Rp 1.74 trillion (US$193 million) in the first three months of the year, up from Rp 1.54 trillion in the same period last year, even though its income from interest dropped to Rp 5.17 trillion from Rp 7.08 trillion.

A summary of its financial report attributed the surge in profit to lower costs, thanks to a sharp decline in the central bank's benchmark interest rate, which fell to a six-year low.

Mandiri, which has 730 branches and 2,071 automated teller machines, said that expenses for interest, or costs of funds, were down by 50.9 percent to Rp 2.62 trillion from Rp 5.34 trillion.

The bank said its third-party funds declined by 8.2 percent to Rp 172 trillion, as part of its attempt to reduce its costs.

The bank also announced that during the first quarter, its total assets declined by 8 percent to Rp 239.38 trillion from Rp 259.56 trillion a year earlier.

The bank's capital adequacy ratio rose to 29.8 percent from 26.6 percent, far higher than the 8 percent minimum requirement set by the central bank. Mandiri's return on equity fell to 34 percent from 36.7 percent.

By the end of March, the bank's gross lending had risen by 11.6 percent to Rp 76.65 trillion from Rp 68.67 trillion a year earlier, but little change from the Rp 75.94 trillion at the end of last year.

Mandiri also reported that its gross non-performing loans rose to 8.4 percent from 6.6 percent, as it had to spare a provision to cover bad loans, some of them belonging to pulp and paper company PT Kiani Kertas. The bank bought the loan from the Indonesian Bank Restructuring Agency in 2001.

Bank Mandiri is included in the government's 2004 privatization program, which aims to raise around Rp 5 trillion in proceeds to help finance the state budget.

But a senior official at the Office of the State Minister of State Enterprises said on Thursday that the sale of another 10 percent stake in the publicly listed Bank Mandiri may have to be delayed into next year due to the current unfavorable condition in the financial market.