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tate-owned lender Bank Negara Indonesia (BNI) is remaining optimistic about achieving its loan growth target in 2018 based on better economic prospects, even though its lending performance has slowed down during the first three months of the year.

The publicly listed bank posted a 10.8 percent year-on-year (yoy) loan growth to Rp 439.4 trillion (US$31.48 billion) in the first quarter of this year, lower than 21.4 percent yoy recorded in the same period of 2017.

However, BNI president director Achmad Baiquni said the bank remained confident that its loans would grow by around 13 percent to 15 percent this year as there were better economic projections and an upward trend in commodity prices.

The loan target is higher than the 10 to 12 percent range the Financial Services Authority (OJK) and Bank Indonesia have projected for this year.

“We are optimistic because the economy is growing stronger; as are commodity prices,” Baiquni said on Monday. “Meanwhile, infrastructure projects are still ongoing.”

Nevertheless, BNI remained cautious about risks, particularly those coming from the global side as they could affect the rupiah exchange rate, said the bank’s treasury and international director Rico Rizal Budidarmo.

Rico said BNI limited its foreign currency-denominated loans at between 15 percent and 17 percent of its total lending portfolio this year. It also maintained its net open position against all foreign currency transactions at around 2 to 3 percent, reducing its exposure to exchange rate risks, he said.

Baiquni said BNI offered foreign currency-denominated loans only to customers with foreign-currency-based cash flows to prevent currency mismatch.

BNI’s first quarter financial report showed that its biggest portion of loans, equal to 30.2 percent, went to private companies, including those disbursed overseas. Those loans grew by 14.8 percent yoy to Rp 132.6 trillion in the first quarter of 2018.

The second-biggest portion, Rp 83.4 trillion, or 19 percent of its total loans, was channeled to state-owned enterprises. BNI only booked 5.2 percent yoy growth in those loans during the first quarter of 2018.

The bank’s lower loan growth in the first quarter of 2018 affected its net interest income (NII), which only grew by 9.5 percent yoy to Rp 8.5 trillion, compared to 12.3 percent yoy seen in the same period last year.

Net profit grew by 13.3 percent yoy to Rp 3.66 trillion in the first quarter of this year, partly due to an increase in loan-loss provisioning aside from lower loan growth.

The bank increased its loan provision by Rp 109 billion in the first quarter of this year, a 6.1 percent yoy increase compared to the same period of 2017.

BNI managed to reduce its non-performing loan (NPL) ratio to 2.3 percent in the first three months of 2018 from 3 percent in the same period of last year as it had put Rp 27.54 trillion in bad loans into a restructuring
program.

BNI risk management director Bob T. Ananta said the loan restructuring program included sales of assets which were previously collateral of the loans.

“We mostly restructured the [bad] loans in the mining, manufacturing and trading sectors,” he said, projecting that the NPL ratio would continue declining to between 2.4 and 2.5 percent by the end of 2018.

Despite slower growth in interest-based revenue, BNI finance director Anggoro Eko Cahyo said the bank saw better performance in non-interest revenue, which grew by 18.5 percent yoy to Rp 2.65 trillion in the first quarter of 2018, compared to 14.2 percent in the same period last year.

He said the growth in non-interest revenue mostly came from recurring activities, including fees from account maintenance, ATM transactions and card businesses.

BNI booked 10.8 percent yoy to Rp 492.9 trillion in third party funds during the first quarter of 2018.