Indonesia'€™s major lenders Bank Negara Indonesia (BNI) and CIMB Niaga saw their net profit growth squeezed in the first quarter of this year from the same quarter last year amid what they called a '€œchallenging'€ environment for the banking industry.

State-owned BNI announced on Tuesday that its bottom line profit grew 15.6 percent to Rp 2.4 trillion (US$207.81 million) as of March this year compared to the same period a year ago. Throughout last year, the bank booked 28.5 percent profit growth.

'€œOur bottom line [profits] were held back by the economic slowdown,'€ BNI president director Gatot M. Suwondo said. Indonesia'€™s economy grew at the slowest pace in four years of 5.8 percent last year.

BNI, however, still managed to grow its lending by 23.3 percent as per March this year compared with the same period last year, to touch Rp 247.1 trillion in outstanding loans.

On a quarter-to-quarter basis, however, lending declined 1.4 percent in the first quarter this year from the fourth quarter last year, according to Gatot.

'€œ[There are] '€˜wait-and-see'€™ factors among investors and the under-realization of some state budget projects,'€ he said.

Gatot added that BNI would remain watchful in expanding its lending business, given Bank Indonesia'€™s (BI) requirement that local banks have loan-to-deposit ratios (LDRs) of at least 92 percent.

BNI'€™s LDR, which measures a bank'€™s liquidity and ability to expand its lending business, have been on the upward trajectory, rising to 88.4 percent in the first quarter, compared to 82.6 percent a year earlier. Gatot said he planned to push down the LDR to between 85 and 87 percent.

The increase in LDR was attributable to tighter competition between Indonesian banks to collect third-party deposits, with BNI'€™s deposits growing by 12.8 percent, lower than the bank'€™s loan growth, to hit Rp 274 trillion as per March.

Malaysian-owned CIMB Niaga, the fifth-largest lender in the country by assets, reported a 4.2 percent increase in net profit during the January-March period of this year to Rp 1.1 trillion compared to the same period a year earlier, when the lender posted higher net profit growth of 12 percent.

The net profit growth in the first three months of this year was driven by a 9.5 percent increase in lending to Rp 160.96 trillion.

Net interest income and non-interest income rose 3.9 percent and 2.2 percent, respectively, in the first quarter of this year from the first quarter a year ago to Rp 2.53 trillion and Rp 855 billion.

'€œThe year 2014 will still be a year of challenges for the banking industry in Indonesia, with hopes that the second half of the year will be better than the first,'€ CIMB Niaga president director Arwin Rasyid said in a statement.

CIMB Niaga'€™s consumer loan segment was hit hard by the bleak global and domestic economy, the bank said in the statement. However, corporate loans were one of the fastest growing sectors, rising 12.7 percent to Rp 47.74 trillion as of March this year from March last year.

'€œWe'€™re seeing a growth momentum in corporate loans this year as we anticipate a slowdown in consumer loan growth,'€ Arwin said.

Both CIMB Niaga and BNI'€™s lending quality were well-maintained with a gross non-performing loan (NPL) of 2.57 percent and 2.3 percent, respectively, as of March, well below the central bank'€™s minimum requirement of 5 percent.

Shares in CIMB Niaga and BNI dropped in Tuesday'€™s trading by 0.49 percent and 2.72 percent, respectively to Rp 1,020 and Rp 4,835 each, compared to the previous day.

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