Niaga Q1 profit up by more than 200%

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.