JAKARTA: State lender Bank Mandiri (BMRI) recorded slower growth in its earnings in the first quarter this year as the bank increased its reserves for potential bad debts.
According to its latest financial report, the bank’s consolidated net profit rose by 4.3 percent year-on-year to reach Rp 5.14 trillion (US$397.03 million) by the end of March. Net profit growth was far lower than the annual growth rate, which reached 14.4 percent in the first quarter of 2014.
Mandiri president director Budi Gunadi Sadikin said slower growth in earnings was partly caused by the increase in the provision for loan losses. “We decided to allocate as much as Rp 1.5 trillion in additional loan provisions in the first quarter, an increase from Rp 1.2 trillion in the same period a year ago,” he said in a press conference.
Budi said he feared the decline in credit quality would continue due to the slowdown in the country’s economic growth.
In the first quarter, the bank reported a slight increase in both its gross and net non-performing loan (NPL) ratios. While the gross NPL rose to 2.3 percent from 2.1 percent, the net NPL increased to 0.9 percent from 0.7 percent. Among the lending segments recording rising NPLs were the small business and commercial banking sectors.
The financial report also revealed that its provision-ratio stood at 150.5 percent, and the consolidated loan provision, or impairment, reached Rp 18.01 trillion in March.
Mandiri treasury and markets director Pahala Nugraha Mansury acknowledged that a part of the provision was still dedicated to improve Bank Syariah Mandiri’s (BSM) financing portfolio, which suffered from poor performance throughout 2014.
BSM’s non-performing financing ratio, as reported before, reached 6.8 percent in 2014, exceeding the 5 percent benchmark set by the banking regulator.
“About 35 percent to 40 percent of the [provision] figure went toward BSM. We have put several measures in place and we expect them to help BSM turn things around this year,” Pahala said.
Meanwhile, in lending, Mandiri booked Rp 532.8 trillion in consolidated loans through the first quarter, 13.3 percent higher from the same period in 2014. Micro loans posted the highest growth, followed by commercial loans.
In terms of the economic sector, the report shows that Mandiri disbursed the largest amount of its loans to the processing industry. However, Budi said the infrastructure sector had begun to gain momentum as well in the first quarter.
“We were involved in several infrastructure projects in the first quarter, such as development of the Jabodetabek [Greater Jakarta] railway and the Sultan Hasanudin Airport [in Makassar, South Sulawesi province],” he said.
Outstanding infrastructure loans touched Rp 39.1 trillion in March, and Mandiri is looking to channel higher infrastructure loans in the second quarter.
“We have received several loan applications and the total amount is larger than what we saw in the first quarter,” Budi added.
Mandiri, according to Budi, may also send a team to China to follow up on a recent agreement on infrastructure financing signed by the Indonesian and Chinese governments.
The agreement will see Chinese banks channel $50 billion-worth of funds for various infrastructure projects. No definite plan has been laid out yet, but the funds could be disbursed through Indonesian state-owned lenders, including Mandiri.
Meanwhile, the financial report shows the lender had up to Rp 868.35 trillion in consolidated assets by the end of March.
It remained the seventh-largest firm on the Indonesia Stock Exchange (IDX) in terms of market capitalization as of Friday, with Rp 275 trillion. Its shares closed at Rp 11,900 apiece, down 0.8 percent from a day before.
