Niaga Q1 profit up by more than 200%

Rendi A. Witular, Jakarta

Publicly listed Bank Niaga, the country's ninth largest bank in terms of assets, said on Wednesday that first quarter profits surged by more than 200 percent on the back of strong revenue from lending operations and a decline in the cost of funds.

Bank Niaga, which is controlled by Malaysian investment firm Commerce Asset-Holding Bhd., said net profit rose to Rp 176 billion (US$20.4 million) in the first three months of this year from Rp 48.8 billion in the same period last year.

Net interest revenue, interest earned from borrowers after deducting the interest paid to depositors, jumped by 79 percent to Rp 357 billion from Rp 199 billion.

"The sharp increase in net interest revenue was mainly driven by a 41 percent decline in the bank's cost of funds for deposits," said Bank Niaga president Peter B. Stock.

Interest revenue accounted for about 69.4 percent of the bank's total revenue, up from 62.7 percent. The remaining revenue was gained from fees and bond proceeds.

Many banks in the country have benefited from the aggressive decline in the central bank's benchmark interest rate, which allows banks to reduce their interest on deposits while at the same time increasing their loans to consumers at more affordable rates.

Bank Niaga's outstanding loans rose to Rp 14.2 trillion in the first quarter of the year from Rp 11.6 trillion in the same period last year. About 39 percent of the loans were channeled to small and medium-sized enterprises, 36 percent to the corporate sector and 24 percent to the consumer sector.

Aside from interest gains, the bank's surging profit was also driven by gains it earned from selling part of its Rp 1 trillion in fixed-rate government recapitalization bonds. The bank earned proceeds of about Rp 100 billion from the sale.

Bank Niaga has predicted profits will grow by 30 percent this year.

Stock also said the bank was planning a rights issue to raise funds in order to increase the capital adequacy ratio (CAR), which had declined due to an increase in loan exposure. The bank's CAR currently stands at 11.58 percent, still above the central bank's minimum 8 percent requirement but below the international standard of 12 percent.

The rights issue would be worth about Rp 1 trillion. The bank is likely to appoint its subsidiary CIMB Securities to arrange the issue, which is scheduled for June or July.