INDONESIAN BANKS PROFITS RISE AFTER DEVALUATION
Indonesia's September devaluation
helped bank profits to rise by 28.6 pct in calendar 1986, but
despite higher world oil prices, banks are likely to see
profits stabilise or fall in 1987, the head of Indonesia's
Association of Private Banks told Reuters.
    Association chairman Nyoman Muna said in an interview that
most banks made windfall profits from the 31 pct devaluation
against the U.S. Dollar.
    He saw the outlook for 1987 as more favourable for
Indonesia, with oil prices now around 18 dlrs a barrel.
    But he forecast that overall bank profits would probably
fall slightly from 1986 pre-tax levels, which he said were
artificially high due to the devaluation.
    The Association's latest report on the performance of
Indonesia's 112 state, foreign and private banks shows that
overall profits rose in 1986 to 495 billion rupiah from 385
billion in 1985.
    This was after a fall in first half profits to 202.9
billion rupiah, from 238.1 billion in January-June 1985.
    The report shows foreign bank profits slumped in 1986,
mostly due to a loss by Bank of America NT and SA.
    Bank of America, a branch of BankAmerica Corp <BAC.N>, was
affected by a string of bad debts and other problems during the
year. It showed a loss of 32.03 billion rupiah, against a loss
of 3.48 billion in 1985, and 1984 profit of 7.25 billion.
    A bank spokesman told Reuters he believed Bank of America
in Jakarta was now back on track. "The worst is behind us."
    Its assets have fallen to 194.07 billion rupiah in 1986
from 293 billion in 1985 and 301.5 billion at the end of 1984.
    Indonesian profits of the 11 foreign banks allowed to
operate in Jakarta fell to 6.58 billion rupiah from 39.2
billion in 1985, the report said.
    These profits do not include offshore loans, which are
handled through other centres but which account for most of the
foreign banks' business.
    Profits of Indonesia's seven key state banks, which account
for more than 80 pct of domestic banking assets, rose sharply
to 319.09 billion rupiah in 1986 from 212.0 billion.
    Total assets of the seven rose to 40,232 billion from
31,288 billion rupiah, the report said.
    Profits of BNI 1946, the largest of the seven, rose to
63.28 billion rupiah from 35.9 billion in 1985.
    Its total assets expanded to 12,115 billion from 8,552
billion at the end of December 1985.
    Muna said in the fiscal year starting April 1, budgeted
government spending will fall in real terms. Many ministries
have had budgets cut severely due to declining oil revenues.
    "This will naturally have its impact on the banking sector,"
Muna stated. "But I think that with oil around 18 dlrs, the
general performance of the banking sector will not be too bad."
    Western bankers said the capital market remained sluggish,
but Indonesia was using more foreign loans.
    Bank of Tokyo <BTOK.T>, the only Japanese bank allowed to
operate here, almost doubled its assets in 1986 to 607 billion
rupiah from 335 billion in 1985, the report showed. But its
profit was barely higher at 8.5 billion from 8.4 billion.
    Citicorp's <CCI.N> local unit Citibank, previously listed
as the largest foreign bank, slipped to second place behind
Bank of Tokyo. It recorded a loss of 480 mln rupiah against a
1985 profit of 11.9 billion.
    A Citibank spokesman told Reuters the loss was a
book-keeping issue and did not represent the true picture, but
declined to give further figures.
    One western banker said that "Citibank is still definitely
the largest foreign operation in Jakarta, whether or not its
profit figures show it."
    Bank of Tokyo and Citibank ranked 10th and 11th in terms of
assets of all banks in Indonesia.
    The government allows only 11 foreign banks to conduct full
banking operations, and restricts their business to Jakarta.
 REUTER
