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tate-owned lender Bank Mandiri will have a bigger capacity for expansion, owing to a higher capital adequacy ratio (CAR) expected this year as a result of asset revaluation.

The publicly listed bank, which is the country'€™s largest lender in terms of assets, has completed an asset revaluation in which it will obtain about Rp 27 trillion (US$2.04 billion) in additional capital, its top executive says.

Bank Mandiri president director Kartika '€œTiko'€ Wirjoatmodjo said the lender currently had Rp 120 trillion in capital and that asset revaluation would increase its capital to at least Rp 147 trillion. Total capital will then be reduced for dividend payout, giving the bank Rp 138 to 140 trillion to boost its capital.

'€œIt is quite strong for our capital and CAR to reach above 20 percent,'€ Tiko, who was previously Bank Mandiri'€™s chief financial officer, said in Jakarta. As of the end of 2015, Mandiri had a CAR of 18.6 percent, an increase from the 16.6 percent posted a year earlier, well above regulators'€™ healthy level of 8 percent, according to its financial report.

The government offers a low tax rate for companies that revalue their assets '€“ a tax incentive program offered by the government through its fifth economic stimulus package released last year. The move is expected to provide a bigger capacity for firms to expand, as companies will see the value of their assets increase, creating greater room or leverage to access external financing.

Many banks were eager to carry out fixed asset revaluation, as doing so would allow them to recalculate their CAR, thus giving them higher lending capacity.

Aside from helping the bank expand regionally, a higher CAR would help Mandiri prepare should the Financial Services Authority (OJK) designate it as one of the country'€™s domestic systemically important banks (DSIBs), Tiko added.

The DSIBs, popularly known as too-big-too-fail banks, are required to have additional capital, namely a '€œcapital conservation buffer'€ to anticipate losses in a crisis period, as well as a special '€œcapital surcharge'€, above the regular CAR of 8 percent.

Tiko added that a higher CAR would also help the bank fulfill a requirement of the Basel III international regulation, the first phase of which had commenced for implementation in 2016 and should be fully adopted by 2019.

The minimum total capital set in the Basel III framework has been set at 8 percent, but starting in 2016, banks are required to meet an additional capital buffer of 0.62 percent, raising the minimum total capital to 8.62 percent. The benchmark is set to increase each year to reach 10.5 percent by 2019, when the Basel III requirements are set to be fully implemented.

Mandiri corporate secretary Rohan Hafas said previously that the bank had been waiting for the tax incentive on asset revaluation for a long time, adding that '€œMandiri'€™s current fixed asset valuation hasn'€™t been appraised since 1990'€.

Former Mandiri president director Budi Gunadi Sadikin also said that the asset revaluation would help create more room for the bank to see higher loan growth at around 12 to 14 percent this year, compared to the 12.4 percent year-on-year (yoy) increase to Rp 595.4 trillion booked last year.