Mandiri is under pressure still

Reading Bank Mandiri's financial statement published this morning, some might say the largest bank have cruised the difficult times and may expect higher net profit this year. The bank recorded net profit of Rp510 billion in the first quarter 2006. That's the reason. For the whole financial year 2005, the state-owned bank booked net profit of Rp660 billion, dropped 85% from 2004. But that's just too early. Why?


In fact, Mandiri's Q1 2006 is worse than Q1 2005 in terms of net profit (Rp519 billion). And if we take a look at the bank's core operation, the net interest margin at Rp2.06 trillion is actually lower than Q1 2005 at Rp2.21 trillion. The bank managed to boost other operations income, but failed to reduce operation costs.
The bank's employment expenses is already the highest among Indonesian banks with average cost of Rp150 million per employee, 50% higher than Bank Central Asia (BCA), the most profitable bank, at Rp102 million per employee.
The gross non-performing loan ratio is obviously higher in Q1 2006 at 27.66% against 18.88%, while net NPL ratio increased from 10.9% to 15.84%. It means, a significant progress in trimming NPL is paramount.
What's happened in the last few months? No progress made after the failure deal with Sampoerna Family to settle Kiani Kertas's US$200 million bad debts. The negotiation to improve loan arrangement with Raja Garuda Mas is not started yet. No immediate solution on Great River International. Suba Indah is also in trouble. Argo Pantes have just survived the bankruptcy lawsuit, but long way to go on Mandiri's loans. The question is whether the management of Mandiri has been tough enough to deal with big guys like Kiani, Raja Garuda, Great River and Argo Pantes?

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