Minister concerned over high level of NPL at Mandiri
Rendi A. Witular, The Jakarta Post, Jakarta
State Minister for State Enterprises Sugiharto has voiced concerns over the high level of non-performing loans (NPL) at state-owned Bank Mandiri, the country's largest bank, following reports of further possible bad loans at the bank.
"Who is not concerned about the high level of non-performing loans at Bank Mandiri? I am greatly concerned about this, although I'm still assessing the bank's financial report for the third quarter of last year," said Sugiharto at his office.
The bank's fourth quarter financial report has yet to be made public.
In its third quarter report, the level of NPLs at Mandiri remained high at 7.49 percent, up slightly from 7.44 percent in same period the year before.
The rate is well above the ceiling of 5 percent set by Bank Indonesia.
Sugiharto's remarks come amid lingering concerns that more of the bank's loans may turn bad, especially those provided to ailing textile and garment company PT Great River Internasional.
All eyes are currently on Great River to see whether the publicly listed company will be able to meet its obligations to various creditors -- including Mandiri -- amid the firm's continuing cash flow problems.
Great River shares have been suspended by the Jakarta Stock Exchange since Jan. 13 due to its failure to repay Rp 11 billion (US$1.2 million) in maturing interest on some Rp 300 billion- worth of bonds the firm issued in 2003.
Great River owes Mandiri a total of Rp 250 billion in the form of bonds (Rp 50 billion) and loans (Rp 200 billion).
"Due to the high NPL rate and efforts to ensure more prudent banking management, we are planning to evaluate the performance of the bank after it finalizes its 2004 audited financial statements," said Sugiharto.
Sugiharto did not specify what he meant by "evaluating" the bank's performance. But according to sources in his ministry, among the options being considered is the possibility of replacing the bank's president director, E.C.W Neloe, at the next shareholders' meeting.
According to the sources, among the strongest candidates to replace the incumbent are Sigit Pramono, president director of state-owned Bank Negara Indonesia; Rudjito, president director of state-owned Bank Rakyat Indonesia; and Cholil Hasan, finance director of state-owned cement producer PT Semen Gresik.
Neloe has been at the helm of Mandiri since 2000.
Mandiri has argued that its high NPL rate is the result of its purchase of debts from the now-defunct Indonesian Bank Restructuring Agency (IBRA) -- an ad hoc state agency tasked with taking over and managing bad assets from the banking sector during the crisis in the late 1990s.
The bank was one of the most active purchasers of non- performing loans from IBRA.