Slower growth at Lippobank

Slower growth at Lippobank

JAKARTA (JP): Lippobank, the publicly-listed bank controlled by the Lippo Group, expects slower growth both in their lending portfolio and in earnings this year due to a tighter money supply.

Eddy Handoko, the bank's vice president, said yesterday that the lending growth rate is projected to decline to 15 percent from nearly 55 percent in 1994.

"We have to reduce the lending growth rate to maintain the bank's financial solvency," he said after the bank's annual shareholder meeting.

Eddy acknowledged that a major cut in Lippobank's lending portfolio would automatically affect earnings, but said that the impact would still be within acceptable levels.

"The growth in profits will still be within the 15 percent to 20 percent level," he said.

Lippobank, nearly 50 percent owned by the investing public on the Jakarta and Surabaya stock exchanges, booked a 41 percent growth in assets last year to Rp 6.91 trillion (around US$3 billion) and a 54 percent in lending to Rp 5.2 trillion, while net profits rose by 54.7 percent to Rp 65.62 billion. Earnings per share, however, dropped to Rp 229.72 from Rp 237.66 due to an increase in the number of shares issued in December last year.

Eddy said that lower growth in lending rate did not affect the bank's earnings in the first quarter of this year, which still rose by around 19.3 percent to Rp 21.5 billion as compared to Rp 18 billion in the fourth quarter of last year.

Lending, however, changed only slightly, rising 3.8 percent in the first quarter to Rp 5.41 trillion from Rp 5.21 trillion at the end of 1994.

Bank Indonesia, the central bank, raised early this month the discount rates of its money market securities (SBPUs) by a half percentage point to curb mounting inflationary pressures.

The rise in the discount rates, the third since January, caused a rise in the deposit rates by an average of one percentage point to between 16 percent and 18 percent per annum. The rise also pushed up the annual lending rate to between 21 percent and 25 percent.

Eddy said that the present tight money situation is still much better than it was in 1990s because the impact of tight liquidity has been less strong.

"As long as economic growth can be maintained at around seven percent, the prospects of the country's banking industry will still be encouraging," he said.

Yesterday's shareholders' meeting approved the management's proposal to distribute a cash dividend of Rp 50 per share to its shareholders. The dividend payout ratio will be 22.17 percent of the total net earnings.(hen)