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The country’s largest lender, PT Bank Mandiri, reported that its 2009 net profit surged by 34.7 percent to Rp 7.2 trillion ($792 million) from Rp 5.3 trillion in 2008.

Bank Mandiri president director Agus Martowardojo said on Monday that the bank enjoyed an increase in credit growth and fee-based income, and benefited from better-than-expected economic conditions.

“Net profit last year was supported by increasing operating income, which rose 15.5 percent to Rp 23 trillion as we managed to improve cost efficiency,” Agus said. “Our good performance last year was also because the economic conditions were better than expected, since we prepared for the worst.”

Agus said Bank Mandiri expanded lending last year by 13.8 percent, to Rp 174.5 trillion, better than the industry average of 10.6 percent.

The strong growth in lending compensated for a decline in the bank’s net interest margin from 5.4 percent in 2008 to 5.2 percent, which limited net interest income to an increase of 13.6 percent, at Rp 17.4 trillion.

“The net interest margin fell as Bank Mandiri gradually cut its lending rate. Our base lending rate fell from 11.6 percent to 9.3 percent,” Agus said.

Bank Mandiri’s fee-based income rose 21.7 percent to Rp 5.7 trillion from Rp 4.7 trillion in 2008, while overhead costs grew 8.9 percent to Rp 9.2 trillion.

Early last year the bank said it expected its ratio of bad loans to increase, as the economy was expected to remain volatile, but the real situation was the opposite, Agus said.

The non-performing-loan ratio improved to 2.8 percent from 4.7 percent in 2008.

“Thus we only set aside Rp 1.9 trillion for provisional costs, lower than the Rp 2.6 trillion in 2008,” he said.

Agus said that although the economy would not likely improve this year as much as it did last year, Bank Mandiri believed the impact of the global crisis would continue to diminish, and thus the banking industry would enjoy a better business climate.

However, there are several factors to beware of, such as the crisis in Greece, he said.