Mandiri profit rises 19% on credit demand

Mandiri profit rises 19% on credit demand

Bloomberg, Jakarta

PT Bank Mandiri, Indonesia's biggest lender by assets, said profit rose 19 percent in the nine months to Sept. 30 as lower interest rates encouraged companies and consumers to borrow more and the cost of funds fell.

Profit rose to Rp 4.48 trillion (US$499.1 million), or Rp 221.93 a share, from Rp 3.77 trillion, or Rp 186.8 a share, in the same period a year earlier, the bank said in an e- mailed statement in Jakarta.

Indonesian banks are reporting increased earnings after interest rates fell to a six-year low and stoked corporate borrowing and consumer spending, which accounts for 70 percent of the $208 billion economy. Improved profit at Bank Mandiri may help the government's plan to sell 10 percent of the lender to help cut its budget deficit of Rp 26.3 trillion.

"We continue to see banks delivering good earnings, and we have no reason to believe that earnings momentum is going to slow anytime in the near future," said Ross Teverson, who helps manage $2.5 billion in Asian assets for Standard Life Investments, including Indonesian stocks such as PT Bank Danamon."Loan growth will continue to be strong in 2005 because the overall economy is quite healthy."

The government forecasts the Indonesian economy, Southeast Asia's largest, will expand 4.8 percent this year and 5.4 percent in 2005, after 4.5 percent growth last year.

Mandiri's net interest income, or revenue from borrowers after deducting interest paid to depositors, rose to Rp 7.13 trillion, from Rp 5.83 trillion a year earlier.

On Sept. 23, Mandiri said it expects higher profit this year as consumers spend more following this year's peaceful parliamentary and presidential elections. The bank posted a profit of Rp 4.59 trillion in 2003. Mandiri has set itself a target of extending as much as Rp 11.4 trillion in new loans this year.

Shares of Bank Mandiri, which have risen 82.5 percent this year, fell Rp 50, or 2.7 percent, to Rp 1,825 at the 4:00 p.m. close on the Jakarta Stock Exchange.