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ublicly listed state lender PT Bank Rakyat Indonesia (BRI), the nation'€™s most profitable bank, plans to issue around Rp 3 trillion (US$259.20 million) worth of debt papers next year to secure funds for its credit expansion plans amid a tight liquidity environment in the country.

BRI finance director Achmad Baiquni said on Thursday that the bank felt the need to raise funds from the debt market as it foresaw that liquidity would remain tight until the end of the year.

'€œI estimate that the tightening liquidity most likely will happen until the end of the year,'€ Baiquni told reporters after a shareholders meeting in Jakarta.

He added that BRI, Indonesia'€™s second largest bank by assets, had not yet decided whether it would issue rupiah-denominated or foreign exchange-denominated bonds, but that the bonds might be issued in the first semester of 2015.

The tight liquidity environment was the result of Bank Indonesia'€™s (BI) aggressive tightening cycle with 175 basis points benchmark interest rate increase to 7.5 percent throughout last year. Such conditions are a headache for banks, which force them to compete to grab third party funds from customers, mostly in deposits.

Baiquni expected the liquidity conditions to improve slightly next year because of expectations that Indonesia'€™s economy would be better than this year. BRI therefore also expects to boost loan growth by 20 to 22 percent next year, after growing 15 to 17 percent this year, he added.

'€œThe bond issuance is also one of BRI'€™s efforts to reach a better loan growth next year,'€ he explained.

When asked whether the recent rally in the stock market would affect companies in terms of raising funds from the capital market instead of from banks, Baiquni said it would not affect BRI'€™s credit growth target.

Indonesia'€™s benchmark stock index, the Jakarta Composite Index (JCI), advanced 3.9 percent in the past week and has increased almost 20 percent so far this year, as the market anticipates a new president for Indonesia who is expected to push for change and reform in Southeast Asia'€™s largest economy.

However, raising funds from the capital market, in relation to bank loans, takes more time, according to Baiquni. '€œ[Besides] the euphoria is temporary,'€ he added, in reference to positive political sentiment during the election year.

Meanwhile, BRI president director Sofyan Basir said that the company managed to secure Rp 3 trillion in assets after fully taking over the BRI II building, as it could relocate some of its Jakarta-based office spaces into the building and save on rental costs.

'€œWe, however, will respect the contract that was already made with tenants who rent office spaces in the building with [previous lessor] PT Mulia Persada Pacific,'€ he said.

BRI took over the building on Tuesday following a dispute with Mulia Persada, which failed to build a new BRI III building in accordance with a contract signed by the two companies.

On Thursday, BRI held an extraordinary shareholder meeting to replace independent commissioner Aviliani, who resigned from the post on May 21 to take up the same position at the nation'€™s largest lender, Bank Mandiri. Dwijanti Tjahjaningsih has been appointed as her replacement. (ask)