NISP sees 40 percent increase in profit this year

The Jakarta Post, Jakarta

Mid-sized bank NISP said that its net profit may grow by up to 40 percent this year on higher revenue from lending and lower fund costs amid a continuing decline in the Bank Indonesia (BI) benchmark interest rate.

NISP president Pramukti Surjaudaja told The Jakarta Post on Friday that despite the general election, the bank was expecting profit to jump by between 35 percent to 40 percent this year.

"We are optimistic that we can post a strong growth this year despite a tougher environment," said Pramukti.

He explained that thus far the imminent general election had not disrupted the bank's operations, although some business players had decided to reduce their activities over fears of election violence.

The bank, which is the country's 13th largest bank in terms of assets, recorded an unaudited profit of Rp 170.7 billion (US$21 million) last year, up from Rp 93 billion in 2002.

Pramukti said that in order to boost profit, the bank planned to increase lending by at least 30 percent this year, or around Rp 2.85 trillion, to Rp 12.35 trillion.

The publicly listed bank, which submerged from the late 1990s banking crisis relatively unscathed, focuses its business on providing loans to small and medium-sized enterprises, which account for around 70 percent of its loan exposure.

Aside from lending, a reduction in the costs of funds was also expected to boost profit this year, as the lower Bank Indonesia benchmark interest rate allows banks to reduce their interest rates on time deposits and savings accounts.

The interest rate on one-month SBI promissory notes is currently 7.42 percent, down from around 8 percent early this year.

BI expects to further cut its benchmark interest rate this year, as inflation remains in check while the rupiah continues to stabilize against the U.S. dollar.

Pramukti said the bank's revenue from operations was expected to jump by up to 50 percent.

Last year, the bank posted a revenue of around Rp 1.3 trillion.

The World Bank's investment arm, International Finance Corp. (IFC), has a 15 percent stake in the bank.

The bank opened 34 new branches in Java, Sumatra, Sulawesi, Bali and Kalimantan last year in a bid to boost its retail operations. Currently, the bank has a total of 134 branches.