State-owned lender Bank Tabungan Negara (BTN) is convinced that the ongoing efforts to reduce the amounts of its non-performing loans (NPL) will show positive results despite economic pressures, its executives said.

BTN finance director Adi Setianto said the bank, the loans of which mostly go to mortgages, was seeing positive progress from an ongoing credit restructuring program. The program was implemented to improve its gross NPL, which stood at 4.7 percent as of June.

'€œOur NPL is decreasing slowly but steadily, from 5.5 percent in the first quarter to 4.7 percent as of June and we expect that the range will be around 3.7 percent to 4 percent by the end of the year,'€ Adi said on Wednesday.

Adi said the range was expected to fall to between 4.5 percent and 4.6 percent in the upcoming third quarter.

He said the NPL decline was the result of an intense debt restructuring and litigation program. The majority of its customers were lower- to middle-income earners who had bought their first houses.

The majority segment has an ordinary financial capability and will suffer from a heavy burden in a weak economy, so that restructuring program is sometimes necessary, Adi said.

'€œIn the current economic situation, debt restructuring tends to increase, but it is part of our loan management. However, we will conduct litigation if the customer does not show improvement,'€ Adi said.

Adi said the bank was still expecting improvement in the overall economy, which could be improved through acceleration of government expenditure, especially in the regions.

As of June, BTN'€™s net NPL ratio stood at 3.37 percent, lower than the 3.83 percent at the end of last year, as the bank continues its long-term improvement in loan quality.

BTN started seeing a worsening NPL two years ago, when the bad loans ratio reached 4.92 percent and 5.21 percent in July and August 2013 because of issues of loan quality in its commercial segment.

In the first half of this year, BTN announced that it had recovered assets worth Rp 761.13 billion (US$53.97 million), which already neared 60 percent of its target. By the end of this year, BTN aims at recovering Rp 1.27 trillion worth of assets.

'€œOur business is relatively more secure than other [lenders] as our securities are houses. It'€™s easier for us to recover our assets in case of NPL,'€ Adi said previously.

Despite struggling to reduce its NPL, BTN enjoyed soaring profits and higher-than-expected credit growth during the first half of this year amid sluggish business performance.

BTN reaped Rp 831 billion in net profits, or 54.25 percent year-on-year (yoy) higher than the Rp 539 billion booked in the same period last year, as loans grew 18.33 percent to Rp 126.12 trillion as of June 30 this year from Rp 106.58 trillion a year ago.

BTN president director Maryono said that the aggressive profit growth was attributed to its net interest income (NII) amounting to Rp 3.19 trillion, which was 19.06 percent higher than last year'€™s.

On Wednesday, an extraordinary shareholders meeting at BTN approved a new board of commissioners, which includes Chandra Hamzah, a former deputy chairman of the Corruption Eradication Commission (KPK).

Chandra replaced BTN'€™s president commissioner Sukardi Rinakit, who resigned on June 4.

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