•    HOME   
•    NEWS   
•    BUSINESS   
•    INTERNATIONAL   
•    TECH   
•    SPORTS   
•    LIFE & TIMES   
•    OPINION   
•    MY JAKARTA   
•    BLOGS   

State-owned PT Bank Negara Indonesia and the privately owned PT Bank CIMB Niaga both more than doubled their profits in 2009 despite slower-than-normal loan growth last year.

BNI is Indonesia’s fourth-biggest bank by assets, while CIMB Niaga is the fifth.

The banks cited strong net-interest margins, increased operational efficiencies and reducing the amount of non-performing loans as the reasons for the strong performance.

BNI’s net profit grew 103 percent from the year before to Rp 2.5 trillion ($267.5 million), while CIMB Niaga’s net profit jumped 131 percent to Rp 1.6 trillion.

Businesses have complained that strong net-interest margins — the difference between a bank’s lending rate and what it pays to borrow money — indicate that banks are not helping the real (non-service) economy enough by lowering lending rates during the economic slowdown.

However, both banks denied this was the case, saying that increased efficiencies and loan quality played major roles in their strong performance.

“The positive performance is due to maintaining net interest margins at 6 percent,” said Gatot Soewondo, president director of BNI, adding that the bank’s net-interest margin was higher — 6.3 percent — in 2008. “However we are also becoming more efficient in our operations,” he said.

Arwin Rasyid, president director of CIMB Niaga, said it was not true that the banks were making excessive profits by raising net-interest margins.

“Our profit also improved because of increased efficiencies,” he said.

During 2009 CIMB Niaga’s loan-to-deposit ratio rose to 95.1 percent from 87.8 percent in 2008, reflecting the bank’s strong commitment to lending to the real sector, Arwin said.

The economic slowdown hurt BNI, with loans growing by only 8 percent to Rp 120.8 trillion in 2009, below the industry-wide average of 10 percent.

However, BNI manage to offset this by lowering its cost of funds, the amount it pays to borrow money, improving its fee-based income and maintaining loan quality, the bank said.

Gatot said BNI booked a 12 percent increase in net-interest income to Rp 11.13 trillion because it managed to push down its cost of funds to 4.5 percent, from 6.5 percent in 2008.

Fee-based income rose 21 percent to Rp 4.3 trillion. Provision costs fell by 7 percent to Rp 4.1 trillion due to non-performing loans dropping to 4.7 percent from 5 percent in 2008.

CIMB Niaga’s loans grew by 11 percent in 2009 to Rp 82.8 trillion, contributing to a 28 percent increase in net interest income to Rp 6.15 trillion. Fee-based income at the bank increased by 27 percent to Rp 1.5 trillion.

This year, as the economic recovery gathers pace, both banks are optimistic about achieving a higher rate of loan growth on the back of improved demand from the corporate sector.

The small and medium-sized enterprises sector and the consumer sector are expected to remain significant contributors to loan growth.

Robby Hafil, an analyst at PT Sucorinvest Central Gani, warned that the expected central bank rate hike in the second half, as inflation begins to accelerate, will put pressure on the banks’ net-interest margins and hit their bottom lines.

Also, demand for credit might not rise significantly because the global recovery was still moving slowly, he said.