Mandiri projects lending to grow 15% in 2004

Rendi A. Witular, The Jakarta Post, Jakarta

State-controlled Bank Mandiri, the country's largest bank in terms of assets, said on Thursday that its lending volume was projected to grow by 15 percent next year.

Mandiri president E.C.W Neloe said that demand for fresh money among corporations would likely surge in the year, as most of them had undergone business restructuring after being hammered by the financial crisis that hit the country in late 1997.

"Next year is an expansion year for most businesses in the corporate sector because they have concluded their business restructuring programs this year, and they will need capital to expand their businesses," said Neloe.

Neloe even played down fears of political unrest during the 2004 general election, saying that businesses were now relatively immune to such conditions.

However, he said that Mandiri would remain prudent in channeling loans to the corporate sector, as it had listed several sectors considered risky in 2004, including textiles, plywood, tourism and the hotel industry.

Mandiri's loan exposure this year is estimated to increase by about Rp 8 trillion from last year, to Rp 73.4 trillion. As of September, the bank had channeled Rp 72.6 trillion in loans, with 41.8 percent of them injected in the corporate sector, 25 percent in the commercial sector and 3.1 percent in the consumer sector.

The bank forecasts that by 2007, the corporate sector would receive 50 percent of the bank's entire lending.

Analysts fear that the high exposure to the corporate sector could harm Mandiri's profitability in the future, as the sector is still considered volatile and prone to default.

As of September, due to the bank's aggressive lending to the corporate sector, its non-performing loans (NPLs) remained high at 7.3 percent -- higher than the 5 percent maximum requirement set by Bank Indonesia.

Neloe said that next year, the bank's interest margin was likely to decline because of stiffer competition in the banking industry, and that it would try to compensate for this by boosting fee-based income activities.

Mandiri announced that, by September, the bank's net profit had increased by 35.2 percent to Rp 3.77 trillion, mostly on higher income from lending interest and fees.

In the first nine months, the bank booked a net interest income of Rp 5.8 trillion, up by 12.4 percent compared to the same period of last year. Its income from fees increased to Rp 3.1 trillion from Rp 3 trillion.

The bank will pay out an interim dividend in December amounting to a total of Rp 1 trillion, or Rp 50 per share.

The bank's net profit this year is expected to reach about Rp 4 trillion, up from Rp 3.5 trillion in 2002.