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INTERVIEW-Indonesia's Mandiri expects sharp drop in bad loans in 2017 -CEO
April 12, 2017 / 2:00 PM / 8 months ago

INTERVIEW-Indonesia's Mandiri expects sharp drop in bad loans in 2017 -CEO

* Mandiri eyes provisions of 16-18 trln rupiah, NPL of 3 pct

* Bank saw tax amnesty inflows of almost 30 trln rupiah

* Mandiri targets small-scale oil palm farmers (Adds comment from CEO, background)

By Eveline Danubrata and Gayatri Suroyo

JAKARTA, April 12 (Reuters) - Bank Mandiri, Indonesia’s biggest bank by assets, is stepping up restructuring and asset sales to tackle bad loans and sharply cut its provisions this year, its chief executive told Reuters.

Analysts have been concerned about Mandiri’s bad loans ratio, which has crept up over the past few years mainly due to its exposure to the mining sector.

At the end of 2016, Mandiri’s provisions were at 24.6 trillion rupiah ($1.9 billion), more than doubling from 12.0 trillion a year earlier, while gross non-performing loans (NPLs) made up 4.0 percent of total loans.

CEO Kartika Wirjoatmodjo said the bank aims to cut provisions for bad loans to 16 trillion-18 trillion rupiah this year, while it expects NPLs to fall to 3 percent of loans, partly by strengthening its risk management and debt collection.

“We hope with all the strategy, the trend of our NPL will go down this year,” Wirjoatmodjo told Reuters in an interview on Wednesday.

The state-controlled bank saw inflows of almost 30 trillion rupiah ($2.3 billion) from Indonesia’s tax amnesty scheme, Wirjoatmodjo said, adding that some of the funds were being converted into assets such as bonds.

Indonesia’s nine-month tax amnesty programme, which ended on March 31, had netted 135 trillion rupiah for the government, according to the latest official calculations.

Mandiri is upbeat about the long-term demand for crude palm oil (CPO), which is used in everything from soaps to chocolates, and plans to expand its lending to small-scale farmers in the sector, Wirjoatmodjo said.

The European Parliament recently called for a curb in the use of the commodity, but Wirjoatmodjo said Mandiri’s corporate clients are increasingly diversifying their export markets to India and Africa.

“Palm is a product that can serve a huge range of retail, consumer businesses,” Wirjoatmodjo said. “In the long run CPO will remain a good commodity.” ($1 = 13,274.00 rupiah) (Reporting by Eveline Danubrata and Gayatri Suroyo; Editing by Jason Neely and Susan Fenton)

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